Annual effective interest rate

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Reference no: EM131188200

The following two investment options are viewed under an annual effective interest rate of i.

-Investment A is a 10-year zero coupon bond which redeems at par-value 250.

-Investment B is a perpetuity-immediate paying an annual payment starting with 4 and having each successive payment increase by X% from the previous payment.

If the volatility of each investment is 8, then find the value of X. Give your answer as a percentage rounded to two decimal places.

Reference no: EM131188200

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