A bank offers selected customers the opportunity to invest in a special savings account, for which...
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A bank offers selected customers the opportunity to invest in a special savings account, for which the force of interest per annum over the coming year is specified to increase as follows: 0.04 + 0.03 t, 8(t)=0.06 - 0.06t+0.09t², 0 < t < 1, <t<}, ≤t≤ 1, 0.06, where t denotes the fraction of the year completed. Poppy opens such an account with a deposit of £5,000 at the start of the year, withdraws £1,000 one-third of the way through the year, deposits £3,000 three-quarters of the way through the year, and closes the account at the end of the year, there being no other payments either to or from the account during its operation. (a) Calculate the closing balance of Poppy's account. (b) Find the nominal interest rate per annum, convertible three times per year, for Poppy's account over the middle third of the year. (c) Find the time-weighted rate of return per annum for Poppy's account. (d) If Poppy's final deposit was £5.000 instead of £3,000, explain, without calculation, how the time-weighted rate of return would change, and how the corresponding money-weighted rate of return would change. A bank offers selected customers the opportunity to invest in a special savings account, for which the force of interest per annum over the coming year is specified to increase as follows: 0.04 + 0.03 t, 8(t)=0.06 - 0.06t+0.09t², 0 < t < 1, <t<}, ≤t≤ 1, 0.06, where t denotes the fraction of the year completed. Poppy opens such an account with a deposit of £5,000 at the start of the year, withdraws £1,000 one-third of the way through the year, deposits £3,000 three-quarters of the way through the year, and closes the account at the end of the year, there being no other payments either to or from the account during its operation. (a) Calculate the closing balance of Poppy's account. (b) Find the nominal interest rate per annum, convertible three times per year, for Poppy's account over the middle third of the year. (c) Find the time-weighted rate of return per annum for Poppy's account. (d) If Poppy's final deposit was £5.000 instead of £3,000, explain, without calculation, how the time-weighted rate of return would change, and how the corresponding money-weighted rate of return would change.
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Answer rating: 100% (QA)
a To calculate the closing balance of Poppys account we must first calculate the interest earned on ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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