Question: Peter wants to save $500,000 to buy a sport car. He plans to make a deposit of $8,000 each month to achieve this goal. ABC Bank offers a deposit rate of 0.5% per month while DEF Bank offers a deposit rate of 6% with quarterly compounding.

c) ABC bank has poor credit ratings and the management of the bank has recently offered higher saving interest rates to attract and retain new customers. Peter told you that he can also formulate a strategy that can achieve his target without using any of his own capital. The strategy is to borrow a 5-year loan of $400,000 from OZ bank with a fixed monthly interest rate of 0.1%, and immediately, he deposits the whole amount into ABC bank saving account to earn an interest rate spread of 0.4% (0.5% - 0.1%). Peter believed that his plan is perfect, risk free and does not need any capital funding at all. He also claimed that he will know exactly how long he has to wait by simply solving the variable t in the below equation 1: Equation 1: $400,000(1 + 0.4%) = $500,000 i) Solve the value of t in above equation 1. Do you agree with Peters strategy? Briefly explain your answer [within 50 words]. ii) Do you agree with Peters strategy is really so perfect and has no risk as he think? Briefly explain your answer [within 150 words].