(a)

Given the effective rate of interest as 7.5%, calculate the present value which will provide the payment of RM1,000 in 1 year and RM2,000 in 3 years.

(b) An investment grows over the 4-year period from time 0 to time 4 according to the following schedule.

• 1st year: an effective rate of interest of 6%.

• 2nd year: a nominal annual rate of discount of 8% compounded quarterly.

• 3rd year: a nominal annual rate of interest of 12% compounded monthly.

• 4th year: the force of interest is 5%.

  Find the average effective annual rate of interest for the 4-year period.