An investor had GHS500,000 security in maturity with the then Gold Cost Security Fund Management and could
Question:
An investor had GHS500,000 security in maturity with the then Gold Cost Security Fund Management and could not redeem the security before the fund management was closed down. The Government provided an option of paying the locked money in 5 years from now at zero coupon rate (option1). The Consolidated Bank of Ghana (CBG) provided a second option of buying the GHS500,000 from the investor today at a discount rate consistent with the 20 April 2020 treasury bill rate (91-day rate).
Use the inflation data presented in Figure 1 to compute the average inflation rate during the period. If the average inflation rate increases by 1.5 % each year, based on this and that of the treasury bill rate in Table 1, which of the options would you advice the investor to take? Provide all calculations to back your recommendation.