Question

Which investment has a greater future value? Investment A that has a $250 investment, per month, for 10 years at 7% annual interest or Investment B that has a $3,000 investment, per year, for 10 years at 6% annual interest?%C2%A0(1 point)%0AResponses%0A%0ABoth investments have the same future value because their payments total $3,000 per year for 10 years%0ABoth investments have the same future value because their payments total $3,000 per year for 10 years%0A%0AInvestment B has a greater future value than Investment A%0AInvestment B has a greater future value than Investment A%0A%0AInvestment A has a greater future value than Investment B%0AInvestment A has a greater future value than Investment B%0A%0AThe future values cannot be compared because the rates of return are different

Answer 1

[AI-generated answer — Bot GPT 3.5]

Investment A has a greater future value than Investment B.

To calculate the future value of Investment A, we can use the formula for calculating the future value of a series of regular payments:

FV = Pmt * ((1 + r)^n - 1) / r

Where:
FV = Future Value
Pmt = Payment amount per period ($250 per month)
r = Interest rate per period (7% annual interest rate / 12 which is the monthly interest rate)
n = Number of periods (10 years * 12 months)

Calculating the future value of Investment A:
FV = $250 * (1 + 0.07/12)^(10*12) - 1) / (0.07/12)
FV = $250 * (1.0058333)^120 - 1) / 0.0058333
FV = $250 * 1.947168
FV = $486.79

Now, for Investment B:
FV = $3000 * (1 + 0.06) ^ 10
FV = $3000 * 1.7908477
FV = $5,372.54

Therefore, Investment A has a greater future value than Investment B.