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Question 3: Time Value of Money (6.5 marks) You made an investment four years ago that matured today and is now worth $100,080.82. The interest
Question 3: Time Value of Money (6.5 marks) You made an investment four years ago that matured today and is now worth $100,080.82. The interest rate the bank gave you was 6.25% compounded monthly, but you had to lock-in the rate and couldn't take out any money until it matured. a) How much was your initial deposit? b) You knew that you were taking a risk by locking-in the rate because rates do vary over time. Interest rates averaged 5.84% the first year, 6.79% the second and the third, and averaged 6.04% this last year all annual rates compounded monthly. Did you win or lose out by locking-in? By how much? c) What was the effective annual interest rate over the four years given the interest rates in part b)
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