This investment does not offer the Texas Corporation the highest annual yield. Please see the correct answer for a complete explanation.
This investment does not offer the Texas Corporation the highest annual yield. Please see the correct answer for a complete explanation.
To answer this, we need to calculate the annual yield on each of the options. 90-day investment: $80,000 × 0.05 = $4,000 discount. Cost of investment = $80,000 $4,000, or $76,000. Income of $4,000 for a 90 day investment is equal to $16,000 annualized ($4,000 ÷ 90 × 360). $16,000 / $76,000 = 21.05% annualized return on the investment. 180-day investment: $75,000 × 0.06 = $4,500 discount. Cost of investment = $75,000 $4,500, or $70,500. Income of $4,500 for a 180 day investment is equal to $9,000 annualized. $9,000 ÷ $70,500 = 12.77% annualized return. 270-day investment: $100,000 × 0.05 = $5,000 discount. Cost of investment = $100,000 5,000, or $95,000. Income of $5,000 for a 270 day investment is equal to $6,667 annualized ($5,000 ÷ 270 × 360). $6,667 ÷ $95,000 = 7.02% annualized return. 360-day investment: $60,000 × 0.10 = $6,000 discount. Cost of investment = $60,000 $6,000 or $54,000. Income of $6,000 for 360 days is an annual income so it does not need to be annualized. $6,000 / $54,000 = 11.11% annual return. The 90 day investment of $80,000 provides the highest return.
This investment does not offer the Texas Corporation the highest annual yield. Please see the correct answer for a complete explanation.
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Which opportunity offers the Texas Corporation the highest annual yield?