Jane Is Having Difficulty Deciding Whether to Put Her Savings

question 49

Multiple Choice

Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. The best deal is:

• A) Four Rivers
• B) Four Rivers for first two years
• C) Mystic
• D) Mystic for last two years
• E) None of these

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Definitions:

Prediction

The act of forecasting or determining the likelihood of future events or outcomes based on current or past data.

Theory

A system of ideas intended to explain something, based on general principles independent of the thing being explained.

Knowledge

Information, understanding, or skill that a person acquires through experience or education.

Common Sense

General knowledge or beliefs commonly held by a group of people, considered as basic understanding without specialized insight.