Assignment Help on Tomis: Case Study Questions

Tomis has been gifted $50,000, he chooses to invest it and has three options in front of him, we will now analyze all three options annually and over the period of 20 years to answer the required questions. 

The formula for annual compound interest, including principal sum, is:
A = P (1 + r/n) (nt) 

Where: 

A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested 

Option 1: Semi-annual compound interest at 4%.

Principal Amount: 50,000

R= 4% (0.04)

N= 2

T=1

A = 50000 (1 + 0.04/2) (2x1)

Amount calculated after 1st year is $52,020.

Option 2: Monthly compound interest at 3.5%

Principal Amount: 50,000

R= 3.5% (0.035)

N= 12

T=1