Question: A person has identified two different alternatives while evaluating their savings. The first alternative is to deposit money in the bank with 20% annual interest

A person has identified two different alternatives while evaluating their savings. The first alternative is to deposit money in the bank with 20% annual interest rate compounded 4-month. The second alternative is to buy a house. The researches made by this person show that the value of the house will increase by 125% in 4 years.

a. Find annual effective interest rate of the bank, annual effective profit rate of house and determine the viable alternative investment method (15 P)

b. When the monthly inflation rate is 1.25%, determine the annual real profit rate of the viable investment (5 P)

c. If 100,000 TL was invested in a new investment with an 5% annual real profit rate instead of the investment you selected, determine the value of the investment after 10 years.(5 P)

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