20. The attached article titled Chinas Foreign-Exchange Reserves Drop Below $3 Trillion, Near Six-Year Low from some years ago states the international reserves held by Chinas central bank decreased by $12.3 billion in January. According to one of the charts, reserves decreased at an average monthly rate of $33 billion over the past 2.5 years so the outflow slowed. If the bank can earn an annual return of 3.00% [compounded monthly] on its reserves and reserves continue to decrease at a monthly rate of $12.3 billion, how many months and years will it be until the reserves are down to $1 trillion? You should solve this problem on the calculator and prove it with an Excel spreadsheet.

Months: 452

21. If outflows continue at $12.3 billon per month, what interest rate or return [using monthly compounding] must the central bank earn on its reserves to stabilize the balance at $3 trillion? Show the basic work and round to one basis point. Note: On the spread sheet enter the Traditional Rate, then a space, and then the APR.

Traditional Rate or Yield to Maturity:

APR or Effective Return:

22. If the reserve outflow increases to $33 billion per month, how many months will it be until the reserves are down to $1 trillion?

Months: