Answered>Order 4587

Amount ($1000)

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To avoid unpleasant surprises, the couple opts to invest the money very safely. The following options are open to them:

1. Insured savings with 7.5% annual yield.
2. Six-year government bonds that yield 7.9% and have a current market price equal to .98 face value.
3. Nine-year municipal bonds yielding 8.5% and having a current market price equal to 1.02 face value (you pay $1.02 to buy the bond worth $1.)

How should the couple invest the money over the next 10 years? (Hint: Answer is $468,500)

I have an excel file I’ve been working with, but don’t see a way to upload it. I’m sure my formulas are completely off, not understanding the banking side of the interest calculations. If you let me know your email address, I will send the file.