Determine the annual effective rate of interest of the plan

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Reference no: EM132800738

Question - EFFECTIVE RATE OF INTEREST

1. A 5 year investment plan pays j 1 = 5% in the years 5 and 4, j2 = 4% in the years 3 and 2, and j4 = 6% in year 1. Determine the annual effective rate of interest of the plan.

2. If the inflation rate is 3.5% what annual rate of interest you should obtain on your investment in order to receive a "real" rate of return 6% per year?

3. Determine the nominal rate j12 equivalent to j2 = 6 for three years followed by a rate of simple discount, d = 6% for a period of 2 months.

Reference no: EM132800738

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