Consider the transactions described in Question 32. Assume, in addition, that after 3 more payments, C sells his right to ftiture payments back to 5 at a price which yields B 20% effective on those remaining payments.

(a) Find the price which B now pays to C.

(b) Find the overall yield rate to C on the entire set of transactions.

(c) Find the overall yield rate to B on the entire set of transactions.

(d) In each of parts

(b) and (c), fmd the real rate of interest earned if the rate of inflation is 5% per year. (See end of Section 3.6.)

AppendixLO1