Bob borrows 1000 from Ed at an annual effective interest rate i, agreeing to repay in full at the end of one year. When the year is up, Bob has no money, but they agree that he can repay one year later in such a way that the annual effective discount rate d in the second year is numerically equal to the interest rate i in the first year. At the end of the second year Bob pays 1200. What is i in the first year?

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Given that the annual effective discount rate d in the second year i... View the full answer