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28 Sep 2019
You invest $100 (W0) in a one year certificate of deposit thatpays W0x(1+i0) at the end of the year where i0 is the currentinterest rate.
The current level of the interest rate is equal to 5% per year.During the first year, the interest rate rises from 5 to 10% peryear (stays constant afterwards)
What is the realised return if the investor's time horizonis:
1) 1 year?
2) 5 years?
3) 10 years?
Future Value coefficient
Years 1 2 3 4 5 6 7 8 9 10
5% 1.05 1.10 1.16 1.21 1.28 1.34 1.40 1.48 1.55 1.62
10% 1.10 1.21 1.33 1.46 1.61 1.77 1.94 2.14 2.36 2.59
You invest $100 (W0) in a one year certificate of deposit thatpays W0x(1+i0) at the end of the year where i0 is the currentinterest rate.
The current level of the interest rate is equal to 5% per year.During the first year, the interest rate rises from 5 to 10% peryear (stays constant afterwards)
What is the realised return if the investor's time horizonis:
1) 1 year?
2) 5 years?
3) 10 years?
Future Value coefficient
Years 1 2 3 4 5 6 7 8 9 10
5% 1.05 1.10 1.16 1.21 1.28 1.34 1.40 1.48 1.55 1.62
10% 1.10 1.21 1.33 1.46 1.61 1.77 1.94 2.14 2.36 2.59
Keith LeannonLv2
29 Sep 2019