Peter and Reesa can book their Horizon Holiday package at the early-booking price of $3900, or wait 4 months and pay the full price of $3995.

a. Which option should they select if money can earn a 5.25% rate of return? In current dollars, how much do they save by selecting the preferred option?

b. Which option should they select if money can earn a 9.75% rate of return? In current dollars, how much do they save by selecting the preferred option?

c. At what interest rate would they be indifferent between the two prices?