Lesson 18
Investment Challenge
1. John receives $1,000 as a graduation gift from his grandparents. Rather than spend it, he decides to invest it in a two-year bond that earns 3% simple interest. John doesn't need access to the money right away because he wants to save it for when he’s ready to buy a home in about 10 years. Is the bond a wise investment for John? Why or why not? What other investment options does John have? In John's case, a bond with compound interest would be the best option, since it has a set maturity rate and he plans to leave it for ten years.
2. If you had the choice between investing $1,000 in a mutual fund that earns 7.5% compound interest or a bond that earns simple interest at 7.5%, which would you prefer and why? Compound earns more over time.
1. John receives $1,000 as a graduation gift from his grandparents. Rather than spend it, he decides to invest it in a two-year bond that earns 3% simple interest. John doesn't need access to the money right away because he wants to save it for when he’s ready to buy a home in about 10 years. Is the bond a wise investment for John? Why or why not? What other investment options does John have? In John's case, a bond with compound interest would be the best option, since it has a set maturity rate and he plans to leave it for ten years.
2. If you had the choice between investing $1,000 in a mutual fund that earns 7.5% compound interest or a bond that earns simple interest at 7.5%, which would you prefer and why? Compound earns more over time.