Questions 23 through 27 are related.

23. The attached article titled Chinas Foreign-Exchange Reserves Drop Below $3 Trillion, Near Six-Year Low states the international reserves held by Chinas central bank decreased by $12.3 billion in January. According to one of the charts, reserves decreased at an average monthly rate of $33 billion over the past 2.5 years so the outflow slowed. If the bank can earn an annual return of 1.50% on its reserves and reserves continue to decrease at a monthly rate of $12.3 billion, how many months and years will it be until the reserves are down to $1 trillion? You can do this problem on the calculator but prove it with an Excel spreadsheet.

Months:

Years :

24. If outflows continue at $12.3 billon per month, what annual interest rate or return must the central bank earn on its reserves to stabilize the balance at $3 trillion? Show the basic work and round to one basis point.

Traditional Rate or Yield to Maturity:

25. With the data for question 23, the effective return or APR is:

APR or Effective Return:

26. If the reserve outflow increases to $33 billion per month, how many months will it be until the reserves are down to $1 trillion? Assume the bank can earn an annual return of 1.50% on its reserves. Answer in number of months.

Months:

27. In the attached article titled Higher Costs Bite Chocolate Makers, graphs show increases in cocoa and sugar prices. Sugar prices increased from $0.11 per pound at the beginning of 2015 to $0.20 per pound at the end of June 2016. The annualized price increase [round the answer to one one-hundredth of a percent i.e. - 1 basis point] over 18 months was:

Annualized Price Increase: