Which of these situations would you prefer?
a. You invest $2,500 in a certificate of deposit that earns an effective interest rate of 8% per year. You plan to leave the money alone for five years, and the general price inflation rate is expected to average 5% per year. Income taxes are ignored.
b. You spend $2,500 on a piece of antique furniture. You believe that in five years the furniture can be sold for $4,000. Assume that the average general price inflation rate is 5% per year. Again, income taxes are ignored.