Which option would provide the highest amount of money

Assignment Help Financial Management

Reference no: EM132070127

Suppose you are 22 years old and graduade college. You have accumulated significant debt in form of student loans and credit card bills. You have two options:

1. You can slowly pay off the debt and invest some money at the same time. Each month, you would use 500$ to pay off debt and invest 500$ in an account. At this rate, it would take you 12 years to pay off the loans. At that point, you can then invest the entire 1000$ in the investment account.

2. You can quickly pay off your debt and invest nothing during that time. During each month, you would use 1000$ to pay off debt and invest nothing. In doing this, you would pay off your debt in 4 years. Then you could invest entire 1000$ in the investment account.

Which option would provide the highest amount of money in your investment account at your retirement which you can assume is exactly 40 years from today. THe interest rate is 7.6% compounded monthly. Show your work.

Reference no: EM132070127

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