Bonds issued by Raxin Accounting have a total yield of 11.4% annually, while Raxin Accounting stocks have a total yield of 14.4% annually. If you invest $2,600 in Raxin Accounting bonds and $2,000 in Raxin Accounting stocks, which investment will have a greater return after nine years, and how much greater will it be?
Answer
A
The bonds will show a profit that is $75.60 greater than that of the stocks.
B
The bonds will show a profit that is $67.60 greater than that of the stocks.
C
The stocks will show a profit that is $8.00 greater than that of the bonds.
D
The stocks will show a profit that is $524.40 greater than that of the bonds.
Explanation
Using the annual yields over 9 years, the bonds earn $2,600 × 0.114 × 9 = $2,667.60 in profit. The stocks earn $2,000 × 0.144 × 9 = $2,592.00. The bonds therefore show a profit $75.60 greater than the stocks, matching “The bonds will show a profit that is $75.60 greater.”
AI-written and checked against the verified answer.