1.) A financial institution offers a 6-monthcompound interest rate of 7.2% per month.(The interest rate applied to a customer whodeposits his money in the bank). Thisinstitution provides capital to investors withan annual loan interest rate of 22%. Aninvestor who receives a loan from thisinstitution wants to invest, expecting a realannual profit of 10%. Since the inflation rate is14.6% annually;a. The financial institution's monthly loaninterest rate,b. The annual real profit rate of the financialinstitution,c. The investor's annual compound discount(profit) rate,d. Calculate the annual real profit rate of thedepositor.(NOTE: All interests that do not write "real" arecompound interest.)

Since there are many subparts, as per our guidelines, we will answer the first three. Please repost…

Answered: a. The financial institution's monthly…

a. The financial institution's monthly loan interest rate, b. The annual real profit rate of the financial institution, c. The investor's annual compound discount (profit) rate,

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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Question

1.) A financial institution offers a 6-month
compound interest rate of 7.2% per month.
(The interest rate applied to a customer who
deposits his money in the bank). This
institution provides capital to investors with
an annual loan interest rate of 22%. An
investor who receives a loan from this
institution wants to invest, expecting a real
annual profit of 10%. Since the inflation rate is
14.6% annually;
a. The financial institution's monthly loan
interest rate,
b. The annual real profit rate of the financial
institution,
c. The investor's annual compound discount
(profit) rate,
d. Calculate the annual real profit rate of the
depositor.
(NOTE: All interests that do not write "real" are
compound interest.)

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