A first-year student has recently won a lottery of $2.5 million. Following this win, the student decides
Question:
A first-year student has recently won a lottery of $2.5 million. Following this win, the student decides to save the money in a savings account for the next four years until she graduates. To make this happen, she decides to pursue different savings options with banks and pick the one with the highest returns. As, a business math student, you are required to help the student with this decision making. 1) The first bank is offering an interest rate of 3.75% per annum, compounded semiannually. What's the rate of growth ($/year) of this saving four years later? 2) The second bank is offering an interest rate of 3.75% per annum (the same rate), compounded continuously. What's the rate of growth ($/year) of this saving four years later 3) Of the two banks, which one would you recommend to the student and why?
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford