Andy decides to invest $200 in a four year bond which promises to pay interest in a time-varying way, but deterministic. More precisely, it is given to be ik = (1 - 1/ for year k with k = 1, 2, 3 and 4. a) Calculate the return of Andy's investment. (Please round your answer to 4th decimal place)

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Andy decides to invest $200 in a four year bond which promises to pay interest in a time-varying way, but deterministic. More precisely, it is given to be ik = (1 - 1/² for year k with k = 1, 2, 3 and 4. a) Calculate the return of Andy's investment. (Please round your answer to 4th decimal place) b) Calculate the annual effective interest rate of this bond. (Please round your answer to 2nd decimal place) c) Andy's friend Jane decides to invest the same amount in an instant access account which pays a fixed continuously compounded rate of interest 25%. What is the total amount of difference between Andy's and Jane's accounts? (Please round your answer to 3rd decimal place) d) Calculate the continuously compounded rate of interest r that would give Jane's investment the same return as that of Andy over the same 4 years' period. (Please round your answer to 2nd decimal place)

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