An investment that has annual fees. Where the stated interest rate during the past two years was 8% compounded continuously. At the end of each year, an investor paid a fee. The fee was 4% of the balance at the end of the first year, and 1% at the end of the second year. a)Find the real annual rate of interest for the two-year period. b)As another option, it was possible to pay a fee of 2.51% at the end of both years.
An investment that has annual fees. Where the stated interest rate during the past two years was 8% compounded continuously. At the end of each year, an investor paid a fee. The fee was 4% of the balance at the end of the first year, and 1% at the end of the second year. a)Find the real annual rate of interest for the two-year period. b)As another option, it was possible to pay a fee of 2.51% at the end of both years.
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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An investment that has annual fees. Where the stated interest rate during the past two years was 8% compounded continuously. At the end of each year, an investor paid a fee. The fee was 4% of the balance at the end of the first year, and 1% at the end of the second year.
a)Find the real annual rate of interest for the two-year period.
b)As another option, it was possible to pay a fee of 2.51% at the end of both years.
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