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You wish to put your savings of £5000 into a bank account. There are two different offers from bank A and bank B. (a) [ Bank A has the following offer for savings: They first offer continuously compounded interest at the nominal rate of 7% for an introductory period of 2 years, after which interest is continuously compounded at the nominal rate 3%. Determine the yield curve F(t). Evaluate the yield curve at = 7 and determine the amount to which your savings will grow after 7 years. Give your answer to the nearest pence. Don't write the £ sign. Answer: (b) Bank B offers a constant nominal interest rate of 4% which is compounded continuously. If you choose this bank, to which amount will your money grow after 7 years? Give your answer to the nearest pence. Answer: (c) Determine the particular time t* (in units of years) where the offers of bank A and bank B generate the same growth of your savings if they are put into the bank account until timet". Enter your answer to 3 digits. Answer:

You wish to put your savings of £5000 into a bank account. There are two different offers from bank A and bank B. (a) [ Bank A has the following offer for savings: They first offer continuously compounded interest at the nominal rate of 7% for an introductory period of 2 years, after which interest is continuously compounded at the nominal rate 3%. Determine the yield curve F(t). Evaluate the yield curve at = 7 and determine the amount to which your savings will grow after 7 years. Give your answer to the nearest pence. Don't write the £ sign. Answer: (b) Bank B offers a constant nominal interest rate of 4% which is compounded continuously. If you choose this bank, to which amount will your money grow after 7 years? Give your answer to the nearest pence. Answer: (c) Determine the particular time t* (in units of years) where the offers of bank A and bank B generate the same growth of your savings if they are put into the bank account until timet". Enter your answer to 3 digits. Answer:

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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You wish to put your savings of £5000 into a bank account. There are two different offers from bank A and bank B. (a) [ Bank A has the following offer for savings: They first offer continuously compounded interest at the nominal rate of 7% for an introductory period of 2 years, after which interest is continuously compounded at the nominal rate 3%. Determine the yield curve F(t). Evaluate the yield curve at t = 7 and determine the amount to which your savings will grow after 7 years. Give your answer to the nearest pence. Don't write the £ sign. Answer: (b) Bank B offers a constant nominal interest rate of 4% which is compounded continuously. If you choose this bank, to which amount will your money grow after 7 years? Give your answer to the nearest pence. Answer: (c) [ Determine the particular time t* (in units of years) where the offers of bank A and bank B generate the same growth of your savings if they are put into the bank account until time t*. Enter your answer to 3 digits. Answer:
Transcribed Image Text:You wish to put your savings of £5000 into a bank account. There are two different offers from bank A and bank B. (a) [ Bank A has the following offer for savings: They first offer continuously compounded interest at the nominal rate of 7% for an introductory period of 2 years, after which interest is continuously compounded at the nominal rate 3%. Determine the yield curve F(t). Evaluate the yield curve at t = 7 and determine the amount to which your savings will grow after 7 years. Give your answer to the nearest pence. Don't write the £ sign. Answer: (b) Bank B offers a constant nominal interest rate of 4% which is compounded continuously. If you choose this bank, to which amount will your money grow after 7 years? Give your answer to the nearest pence. Answer: (c) [ Determine the particular time t* (in units of years) where the offers of bank A and bank B generate the same growth of your savings if they are put into the bank account until time t*. Enter your answer to 3 digits. Answer:
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