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Juan Has $1,000 That He Would Like to Invest in a CD.His

question 10

Essay

Juan has $1,000 that he would like to invest in a CD.His bank offers two alternatives,i.e.,a one-year CD paying 6 percent or a two-year CD paying 9 percent.Juan has been reading that interest rates are rising and,based on his research,he estimates that by year-end the rate on one-year CDs will increase to 10 percent.What alternative would give Juan the most interest and what would the total interest be?
(a)Two one-year CDs returning $120 interest
(b)Two one-year CDs returning $160 interest
(c)One two-year CD returning $180 interest
(d)One two-year CD returning $1,900 interest

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Definitions:

Share of Stock

A unit of ownership in a corporation that entitles the shareholder to a portion of the corporation's earnings and assets.

Share Value

The financial worth of a single share of a company's stock.

Dividend Policy

Dividend Policy is a company's strategy or guidelines used to decide how much of its earnings will be paid out to shareholders in the form of dividends.

Common Stock

This is a type of security that signifies ownership in a corporation and represents a claim on part of the company's profits.

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