Textbook link – Ch 4https://saylordotorg.github.io/text_money-and-banking-v2.0/s07-interest-rates.htmlStop and Think BoxSuppose you have $1,000 to invest for

Textbook link – Ch 4https://saylordotorg.github.io/text_money-and-banking-v2.0/s07-interest-rates.html
Stop and Think Box
Suppose you have $1,000 to invest for a year and two ways of investing it (each equal in terms of risk and liquidity): a discount bond due in one year with a face value of $1,000 for $912 or a bank account at 6.35 percent compounded annually. Which should you take?

Choose the bond, which will yield 9.65 percent: (1000 − 912)/912 = .0965. To maximize your haul, invest the $88 left over from the purchase of the bond in the bank account.