You have $12,000 in cash. You can deposit it today in a mutual fund earning 5.7 percent semiannually; or you can wait, enjoy some of it, and invest $11,000 in your brother's business in two years. Your brother is promising you a return of at least 10.1 percent on your investment. Whichever alternative you choose, you will need to cash in at the end of ten years. Assume your brother is trustworthy and both investments carry the same risk.
a. What would be the future value of the bank investment?
b. What would be the future value of investing in your brother's business?
c. Which one will you choose?