Sulsa invests $9,122.85 at t = 0 and $29,100 at t = 2. In return, she receives $28,223 at t = 1 and $10,000 at t = 3.

Write down a time 0 equation of value and verify that it is satisfied for v = 0.95, v = 0.97, and v = 0.99.

Find the corresponding three yield rates. (Round your answers to two decimal places.)

v = 0.95 ____________%

v = 0.97 _____________ %

v = 0.99 ____________%

Solutions

Expert Solution

-9122.85-29100*v^2+28223*v+10000*v^3=0
=>v=0.95, 0.97, 0.99

At v=0.95:
=-9122.85-29100*0.95^2+28223*0.95+10000*0.95^3
=0

At v=0.97:
=-9122.85-29100*0.97^2+28223*0.97+10000*0.97^3
=0

At v=0.99:
=-9122.85-29100*0.99^2+28223*0.99+10000*0.99^3
=0

=>i=1/0.95-1,1/0.97-1,1/0.99-1
=>i=5.2632%,3.0928%,1.0101%

jeff jeffy answered 2 years ago

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