Part 1 - Concepts Answer the following: 1. State some of the purposes of finance...
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Finance
Part 1 - Concepts Answer the following: 1. State some of the purposes of finance 2. Give an example of a risk and return relationship Part 2 - Interest Rate You have just received a bonus of 15,000 euros and have decided that you want to invest the money. After discussing your options with your bank, you have narrowed it down to two options: A. A savings account that provides 7% simple interest annually. B. A savings account that provides 6.25% compounded interest annually. Assume that the deposit is made in year 0 and payments are made at the end of periods with first payment end of year 1. Answer the following: 1. What is the difference between simple and compounded interest? 2. You have decided to leave the money in the account for 12 years. Which option should you choose? 3. In which year does option B become more favorable than option A? Show your calculations
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