extra_problems_3

extra_problems_3 - 1.Money is invested in a savings account...

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1.Money is invested in a savings account with an annual effective rate of interest of 6% for two years. The annual rate of inflation is 3.2% compounded monthly for the first year and 4.8% compounded monthly for the second year. Calculated the "real" annual effective rate of interest earned over the two years. 1 i real 2 1.06 2 1 .032 12 12 1 .048 12 12 i real 1.06 2 1 .032 12 12 1 .048 12 12 1 2 1 1.8507251% 2. Let i 2 denote the annual nominal rate of interest compounded semi-annually and let r 2 denote the annual nominal rate of inflation compounded semi-annually. Derive an expression for the "real" annual nominal rate of interest compounded semi-annually. Hint: first find the "real" accumulation function. a r t a t p t 1 i 2 2 2 t 1 r 2 2 2 t 1 i 2 2 1 r 2 2 2 t i real 2 2 a r t 1 2 a r t a r t
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This note was uploaded on 03/30/2012 for the course ACTSC 231 taught by Professor Chisholm during the Spring '09 term at Waterloo.

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