A business executive has the option to invest money in two plans: Plan A guarantees that...
A business executive has the option to invest money in two plans: Plan A guarantees that each dollar invested will earn $0.70 a year later, and Plan B guarantees that each dollar invested will earn $2 after 2 years. In Plan A, investments can be made annually, and in Plan B, investments are allowed for periods that are multiples of 2 years only. How should the executive invest $100,000 to maximize the earnings at the end of 3 years?
Solver is advising that the best way to maximize profit is to use Plan A for $410,000 however I don't feel that is correct so am wanting a second opinion.
Homework Answers
First invest all the amount ($100,000) in Plan B. Then you will get $100,000(invested amount)+$200,000(profit earned) = $300,000 at the end of first two years.
Then at the start of third year invest the entire amount ($300,000) in plan A. Then you will get $300,000(invested amount) + $210,000 (profit earned) = $510,000 which is the maximum amount that you will get after 3 years.
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Click and enlarge to view please options for req 3 are (Earlier savings or later saving...
Click and enlarge to view
please
options for req 3 are (Earlier savings or
later saving ) and (Later or
sooner)
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Click and enlarge to view
please
options for req 3 are (Earlier savings or
later saving ) and (Later or
sooner)
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on all of them! Thank you!
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