Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 19

Compare investment alternatives A friend has $5,000 that has been saved from her part-time job. She will need her money, plus any interest earned on it, in six months and has asked for your help in deciding whether to put the money in a bank savings account at 3.5% interest or to lend it to Simone. Simone has promised to repay $5,200 after six months.
Required:
a. Calculate the interest earned on the savings account for six months.
b. Calculate the rate of return if the money is lent to Simone. Round your percentage answer to two decimal places.
c. Which alternative would you recommend? Explain your answer.