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Question 6.T-Y-S.N: A certain U.S. government savings bond can be purchased for ...

A certain U.S. government savings bond can be purchased for \$ 7,500. This bond will be worth \$ 10,000 when it matures in 5 years. As an alternative, a 60 -month certificate of deposit (CD) can be purchased for \$ 7,500 from a local bank, and the CD yields 6.25 \% per year. Which is the better investment if your personal MARR is 5 \% per year? (6.6)

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Bond: F W=\$ 10,000 with certainty (\operatorname{IRR}=5.922 \%)

\mathrm{CD}: \mathrm{FW}=\$ 7,500(F / P, 6.25 \%, 5)=\$ 7,500(1.3541)=\$ 10,155.80(\mathrm{IRR}=6.25 \%)

The CD is better, assuming comparable risk in both investments.

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