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A 55000 bond is purchased for a five-year period when interest rates are 20%. At the same time £5000 is put on deposit at a bank and £1000 withdrawn from the account at the end of

A 55000 bond is purchased for a five-year period when interest rates are 20%. At the same time £5000 is put on deposit at a bank and £1000 withdrawn from the account at the end of

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A 55000 bond is purchased for a five-year period when interest rates are 20%. At the same time £5000 is put on deposit at a bank and £1000 withdrawn from the account at the end of each year. Compare the return from the investment in the bond with that from the bank if the bank offers: (a) A 20% rate of interest compounded annually. (6) A 5% rate of interest compounded annually. (c) A 30% rate of interest compounded annually.
Transcribed Image Text:A 55000 bond is purchased for a five-year period when interest rates are 20%. At the same time £5000 is put on deposit at a bank and £1000 withdrawn from the account at the end of each year. Compare the return from the investment in the bond with that from the bank if the bank offers: (a) A 20% rate of interest compounded annually. (6) A 5% rate of interest compounded annually. (c) A 30% rate of interest compounded annually.
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