solution

Time value Peter just got his driver’s license, and he wants to buy a new sports car for $70,000. He has $3,000 to invest as a lump sum today. Peter is a conservative investor and he only invests in safe products. After approaching different banks, he is offered the following investment opportunities:

a. River Bank’s savings account with an interest rate of 10.8% compounded monthly.

b. First State Bank’s savings account with an interest rate of 11.5% compounded annually

c. Union Bank’s saving account with an interest rate of 9.3% compounded weekly. How long will it take for Peter to accumulate enough money to buy the car in each of the three cases?

 
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