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Gringotts Banking Wizards (GBW) offers a Poly-payment Product (PPP) for customers. The details for this product is as follows: Customers pay $310.43252315123 to buy a
Gringotts Banking Wizards (GBW) offers a "Poly-payment Product" (PPP) for customers. The details for this product is as follows:
- Customers pay $310.43252315123 to buy a PPP.
- The PPP will pay out $87 after exactly one year, and then $87 another year after that.
- Exactly 1 year after the second payment of $87, the PPP will pay out a further payment of $188.
- There are no further payments after this payment of $188.
(a) Calculate the return GBW promised to investors that buy this product, expressed an effective annual rate. Give your answer as a percentage to 4 decimal places. (2 marks)
(b) If instead GBW were to offer investors an effective annual return of 8.7079%, what price should they charge for this product? Give your answer in dollars, to the nearest cent. (2 marks)
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