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The following two investment options are viewed under an annual effective interest rate of i. Investment A is a 10-year zero coupon bond which redeems
The following two investment options are viewed under an annual effective interest rate of i. Investment A is a 10-year zero coupon bond which redeems at par-value 250. Investment B is a perpetuity-immediate paying an annual payment starting with 4 and having each successive payment increase by K% from the previous payment. If the volatility of each investment is 8, then find the value of K. Give your answer as a decimal rounded to two places (i.e. X.XX).....e. if your answer was K% = 2.54%, you would answer 2.54. =
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