Accumulating a growing future sum You have $30,000, and you are making the decision between consumption and investment. You are considering either using all of the money to buy a new car or investing the whole amount. You have two investment options: You can either put the money into a savings account with a nominal interest rate of 5% compounded monthly, or invest the money in stocks with an expected return of 6% compounded continuously.

a. If you choose to invest, how much will you have 6 years later if you invested in (1) the savings account, or (2) stocks?

b. If you invested in the savings account, how long will it take for you to double your money?

c. Suppose the price of the car inflates by 2% per year. If you choose to invest your money in stocks, how long will it take for you to be able to afford two cars?

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