Tech Marketing Inc. is an online and social marketing consulting firm that started in Michael David's garage. The company now has 10 employees that must work in shifts due to the small space. Michael has decided to accept $210,000 from the investor for 50% ownership in his company and use it to grow Tech Marketing into a national consulting firm. However, during the next two years he plans to spend only $10,000 and invest the remaining $200,000 for two years at 6% interest rate compounded monthly.
a. How much cash will the company have at the end of two years? (You can use the compound interest calculator at https://math.about.com/library/blcompoundinterest.htm)
How much of that will be interest income?
b. How much interest would Tech Marketing earn if it invested the $200,000 at 6% simple interest? Please show calculations.
c. How much more interest income did the compound interest option earn? Please show calculations.