Yani has $12,000 for investment purposes. His bank has offered the following three choices:
Choice 1. A special savings certificate that will pay $190 each month for 5 years and a lump sum payment at the end of 5 years of $13,000
Choice 2. Buy a share of a racehorse for $12,000 that will be worth $26,500 in 5 years
Choice 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly
Use an annual worth analysis to make a recommendation to Yani.
What is the annual worth of each choice?