Question: Suppose you know that you will need $2,500 two years from now in order to make a down payment on a car. a. BankOne is
Suppose you know that you will need $2,500 two years from now in order to make a down payment on a car. a. BankOne is offering 4% interest (compounded annually) for two-year accounts and BankTwo is offering 4.5% (compounded annually) for two-year accounts. If you know you need $2,500 two years from today, how much will you need to invest in BankOne to reach your goal? Alternatively, how much will you need to invest in BankTwo? Which bank account do you prefer? b. Now suppose you do not need the money for three years. How much will you need to deposit today in BankOne? BankTwo
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