Which of the Following Investments Would You Prefer? Support Your

question 95

Essay

Which of the following investments would you prefer? Support your answer.
A) A $10,000 savings bond that grows at the rate of 6% per year compounded semi-annually, for 5 years.
B) One lump sum payment of $5,000 now plus another $5,000 after 2 years.You estimate you could invest the first payment at 5% and the second one at 6%.
C) A single payment of $13,500 in 5 years.

• A) A $10,000 savings bond that grows at the rate of 6% per year compounded semi-annually, for 5 years.
• B) One lump sum payment of $5,000 now plus another $5,000 after 2 years.You estimate you could invest the first payment at 5% and the second one at 6%.
• C) A single payment of $13,500 in 5 years.

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Definitions:

Matched Pairs

A study design where subjects are paired based on certain characteristics, and each pair differs by the factor being tested.

Test Statistic

A value calculated from sample data used to evaluate the validity of a hypothesis in statistical tests.

Degrees of Freedom

Refers to the count of values in the final calculation of a statistic that are free to vary.

Student T-distribution

A probability distribution that is used for estimating population parameters when the sample size is small and the population variance is unknown.