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    princessuk's Avatar
    princessuk Posts: 3, Reputation: 1
    New Member
    		  
    #1

    Nov 29, 2010, 06:51 AM
    Finance question help
    A representative of a financial institution offers you two alternative financial investments, namely Investment A and Investment B. If you go ahead with Investment A, you have to invest £5,000 now and you will receive £7,000 in 5 years' time. If you choose Investment B, you are required to invest £4,000 now and you will receive £7,000 in 6 years' time. Both investments are very safe because the financial institution is well-capitalised and reputable. Would you choose Investment A or Investment B?
    codyman144's Avatar
    codyman144 Posts: 544, Reputation: 31
    Senior Member
    		  
    #2

    Nov 30, 2010, 04:26 PM
    Depends on your own personal discount rate. Try several different rates and solve for the Net Present Value (NPV) of both investments. Also you could try to calculate the Internal Rate of Return (IRR) for both.
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