Juan Rodriguez plans to purchase a home in five years and wants to save up for a down payment. He recently inherited $ he can save. He separately examines his budget and determines that he can afford $ per month which he can put into a highyield savings account, independent of the inheritance. That would allow him to use the $ for things now and still save up for the down payment. While investigating different investment opportunities, he comes across the following options:
Option : A year Certificate of Deposit that pays Annual Percentage Rate compounded annually.
Option : A HighYield Savings Account that pays Annual Percentage Rate compounded monthly for a period of years.
Please answer the following questions.
Part A: If Juan deposits all of his inheritance into the Certificate of Deposit in a lump sum, how much money would be in the account after years?
Part B: If Juan pays $ a month into the HighYield Savings Account, how much money would be in the account after years?
Part C: What are the advantages and disadvantages to each of the options? List at least one advantage and one disadvantage for each option. Some things you might consider are the total amount deposited, interest earned, flexibility in budget, etc.