@Rabeiea-Aslam said in MGT201 GDB 1 Solution and Discussion:

Option 1:

Investing Rs. 100,000 at 12% interest rate compounded semiannually for 10 years

Option 2:

Depositing half of investment amount in a saving account for 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years.

Calculation of both Option

Option 1:

Semi Annual Yearly Compounding

FV = PV x (1 + i/2) 2n

FV = 100,000 x (1 + 0.12/2) 2 x 10

FV = 320713.5

Option 2:

FV= PV (1 + i) n

FV = 50,000 (1+0.12) 10

FV = 155292.4

Option 1 is best for Mr. Ahmad because the value of FV is grater than Option 2