Calculate the value of both investment options

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Mr. Ahmed has just received his Bonus and he is looking for a suitable investment option that will repay him in long term. He has consulted his friend to invest RS 100,000 out of his Bonus amount. His friend has suggested following two options:

Option 1:

Investing RS 100,000 at compounded monthly interest rate for 10 years (12% annually for first 5 years and 14% annually for remaining).

Option 2:

Depositing half of investment amount in a saving account for 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years.

Required:

Problem 1: Calculate the value of both investment options

Problem 2: Based on the calculation of part 1, which option Mr. Ahmed should select and why?

Reference no: EM132807934

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