Question
Let 0 Let 0 < r < I be an interest rate. Consider the following compound investment, schemes: Scheme II: Interest is compounded at a,
Let 0
Let 0 < r < I be an interest rate. Consider the following compound investment, schemes: Scheme II: Interest is compounded at a, ra.l,e of 3r at, Lhe encl of every third month. Scheme III: Interest is c.oynpouncled at a ral.c of 6T at Lhe end of every sixth month. Question 1 Suppose [hut you R, dollars on .Jawuarw 1st. Rx7,nk these schemes in terms of which proai.des the greatest, return after one year. Justify. using calculations ancl arguments, you chose this ranking. Question 2 Let r I, rrr, and r 111 denote thc an.rvu,al effective rates of lhe three schemes. Rnnk these three schemes in Ir:rrns of their annual eJJeclive mites. Justify, using and why you chose this ranking.
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