An investor has the choice of either of the following savings plans:

(i) Ten annual premiums, each of 100 and payable in advance, will

give 1,700 after 10 years, or

(ii) Fifteen annual premiums, each of 100 and payable in advance, will

give 3,200 after 15 years.

The investor must declare which plan he is choosing when he pays the first

premium.

(a) Find the yield on each plan.

(b) Assume that an investor has chosen plan (i). Assume further that

after 10 years he deposits the proceeds of the plan in an account

which will earn interest at a fixed rate and that he also makes fiveannual payments of 100 to this account, the first payment being

made at the time the original savings plan matures. How large must

the fixed rate of interest be in order that finally, after 15 years, the

investor may receive 3,200?