A sum of money is invested in a project for a 3-year period. • In the first year, the rate of interest earned on the investment is 4.25% per annum convertible quarterly. In the second year, the rate of interest earned is 3.7% per annum convertible monthly. In the third year, the interest rate earned is equivalent to a rate of discount of 3.9% per annum convertible half-yearly. Find, to the nearest 0.1%, the annual effective yield achieved on the investment.
A sum of money is invested in a project for a 3-year period. • In the first year, the rate of interest earned on the investment is 4.25% per annum convertible quarterly. In the second year, the rate of interest earned is 3.7% per annum convertible monthly. In the third year, the interest rate earned is equivalent to a rate of discount of 3.9% per annum convertible half-yearly. Find, to the nearest 0.1%, the annual effective yield achieved on the investment.
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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Using formulas, no tables, hint: find a single annual interest rate over a 3-year period.
Transcribed Image Text:A sum of money is invested in a project for a 3-year period.
•
In the first year, the rate of interest earned on the investment is 4.25% per annum
convertible quarterly.
In the second year, the rate of interest earned is 3.7% per annum convertible
monthly.
In the third year, the interest rate earned is equivalent to a rate of discount of
3.9% per annum convertible half-yearly.
Find, to the nearest 0.1%, the annual effective yield achieved on the investment.
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