Question 350755: Willie owns and manages a number of real-estate rental properties in town and enjoys being his own boss. At 46 years old, Willie figures he would like to retire after working for 10 more years, so he is starting to think about investing for the future. His latest investments have been successful – after seeling a four-unit apartment building and a town house, Willie has $400,000 in the bank and is debt-free. With only 10 years before retirement, Willie wants to make solid financial decisions that will limit his risk exposure.
An attractive property has come on the market this week – a pair of townhouses with a great view. The rental units are in good repair and would need only some minor repairs in order to get them into shape for rental. They are in a good location for vacationers and summer rentals. The price tag for the two townhouses is $275,000 – well within his range. He figures he can invest the remaining $125,000, and between the two hopes to have $1 million on which to retire by age 56.
Willie’s local bank offers a 2-year certificate of deposit (CD) that pays 6% compounded quarterly. A competing bank in town also offers a 2 year CD that pays 6%, but the interest is componded daily. If Willie invests the $125,000, how much more money will he get from the second bank after two years due to the daily compounding (assume exact time is used)?
Answer by solver91311(24713)   (Show Source):
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