Question Three
Bank interest rates are 2.5% per year, compounded annually.
a) What is the Rate of Return for the two projects shown below.
b) If you have $1,000,000 to invest, which project should you choose? (Assume any uninvested funds remain in the bank for 7 years
Project A
Today: Invest $700,000
7 Years From Today: Receive $1,550,000
Project B
Today: Invest $500,000
7 years from today, receive $1,350,000