A friend has $5,000 that he has saved from his part-time job. He will need his 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% interest or to lend it to Victor. Victor has promised to repay $5,300 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 Victor. Round your percentage answer to two decimal places.

c. Which alternative would you recommend? Explain your answer.