Question: The interest rates compounded continuously are 2.25% for the first two years, 2.5% for the next three years, and 1.75% for the last three
The interest rates compounded continuously are 2.25% for the first two years, 2.5% for the next three years, and 1.75% for the last three years. (a) Find the yield rate y(0, T) for maturities T = 0.25, T = 2.5, and T3 = 8 (years). y(0, T) = y(0, T) = % (to 3 decimals) % (to 3 decimals) y(0, T3) = Note: Enter the rates as percentages (but do not include the % sign). However, in all calculations below use decimal values. For example, if you enter 1 as a percentage for the yield, use 0.01 to answer questions below. Accumulated Value =$ % (to 3 decimals) Use the rates obtained to answer the following questions. (b) If $2400 is invested at the beginning of year one, what is the accumulated value at time 8 (years)? (c) The accumulated value of an investment at time 2.5 (years) is $3601.23. Find the present value at the beginning of year one. Present Value = $ (d) An investment is made at the beginning of year one. The interest earned on the investment from time 2.5 to 8 (in years) is equal to $580.78. Find the original principal. Principal = $
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