An investment fund (Fund A) has been launched at time 0. It is given that the...
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An investment fund (Fund A) has been launched at time 0. It is given that the fund earns interest at a force of interest &, = max(0.01,0.02t -0.08t +0.07), where t 0. It is given that the annual inflation rates over 1st year, 2nd year, 3rd year, 4th year and 5th year are 1%, 1.6%, 2%, 1.5% and 1.7% respectively. (a) Calculate the real rate of interest of the investment fund over the period [1,4]. (b) An investor deposits $1600 in the investment fund at time 0. After that, the investor deposits $2000 and $1500 at time 1.5, 3.5 respectively. In addition, the investor has withdrawal an amount $1000 at time 2. Calculate the total amount of interest earned by the investor over the period [1,3] (i.e. 2nd year plus 3rd year) An investment fund (Fund A) has been launched at time 0. It is given that the fund earns interest at a force of interest &, = max(0.01,0.02t -0.08t +0.07), where t 0. It is given that the annual inflation rates over 1st year, 2nd year, 3rd year, 4th year and 5th year are 1%, 1.6%, 2%, 1.5% and 1.7% respectively. (a) Calculate the real rate of interest of the investment fund over the period [1,4]. (b) An investor deposits $1600 in the investment fund at time 0. After that, the investor deposits $2000 and $1500 at time 1.5, 3.5 respectively. In addition, the investor has withdrawal an amount $1000 at time 2. Calculate the total amount of interest earned by the investor over the period [1,3] (i.e. 2nd year plus 3rd year)
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SOLUTION a To calculate the real rate of interest of the investment fund over the period 1 4 we need ... 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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