Goliath Banking Corporation (GBC) offers an Income Investment Product (IIP) for customers. The details for this product
Question:
Goliath Banking Corporation (GBC) offers an "Income Investment Product" (IIP) for customers. The details for this product is as follows: Customers pay $918.29787051119 to buy an IIP. The IIP will pay out $42 at the end of each year for 9 years The IIP will pay out a further single payment of $1,000 after 9 years There are no further payments after this single payment at time 9.
(a) Calculate the return GBC promised to investors that buy this product, expressed an effective annual rate. Give your answer as a percentage to 4 decimal places.
(b) If instead GBC were to offer investors an effective annual return of 4.6461%, what price should they charge for this product? Give your answer in dollars, to the nearest cent.
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling