Calculate the corresponding effective annual rate

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Question - Mr Jane has just celebrated his 40th birthday. He has bought a retirement product that will start providing him and his family with fixed semi-annual payments forever when he retires at 65. The relevant yearly discount rate is 6% compounded semi-annually.

a) Calculate the corresponding effective annual rate.

b) If the product costs $2,000,000 today, what is the size of each payment? Show supporting calculations.

Reference no: EM133064804

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