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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 bonds than 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?
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?
3. Fill in the table below and show solutions for each:
Fill in the table below and show solutions for each:
Strategy
Principal
Interest Rate
Time
Interest or Return Type
Interest or Return Earned
Total Value
Stock
$10,000
3%
10 Years
Compound
Mutual Fund (portfolio of stocks & bonds)
$1,000
7%
20 Years
Bond
$100
5%
30 Years
Simple
$700
10%
1 Year
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