1.

1. Compare the proceeds from a 2-year $100,000 investment at 5.5%, annual compounding, with that from investing for 1 year at 5.5% and rolling over at 5.5% for the second year.
2. Compare the proceeds from a 2-week (money market) $100,000 investment at 5.5%, with that from investing for 1 week at 5.5% and rolling over at 5.5% for the second week.

2.

1. You put 100,000 into a money market instrument September 4 2018 for six calendar months at 3%. When it matures, you roll it over for the next six months at 4%. What are the proceeds? Be careful with the day counts.
2. What would need to be the (equivalent) rate on a one-year (i.e., non-money market) semi-annual compounding instrument in order to produce the same proceeds?
3. Suppose the one-year rate in b) is 3.5%. What must the latter (forward) 6-month rate be in a), where the initial rate is 3%, in order to produce the same proceeds as the one-year?

3. You invested $1mm on Sept 4, a Friday, for three days at 1%. Because Monday is Labor Day, you will not receive your proceeds until the next day. What is your effective rate (the annualized rate you really received)?