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Warren is an investor who seeks a maximum return on his investment of P = $2,000. Suppose that only two investment options are currently available:
Warren is an investor who seeks a maximum return on his investment of P = $2,000. Suppose that only two investment options are currently available: (1) Buy a 2-year bond, or (2) buy a 1-year bond, then take the proceeds from that bond after one year, and buy another 1-year bond. Suppose, also, that the data on interest rates for two years is publicly available and accurate, and that the 2-year bond does not make any payments until it matures and compounds interest annually. Assume that investors do not bear any transaction costs and are only concerned about the return on investment. How should Warren calculate returns on each investment strategy? Use the dropdown menus to select an appropriate method and then enter the return amounts in the "Return" column. Based on the returns, Warren will invest in__. Should there be a fixed fee of $10 per transaction, how, if at all, would it affect Warren's investment strategy? Warren would invest in two successive 1-year bonds instead. Warren would invest in just one 1-year bond instead. Warren would still invest in a 2-year bond
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