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You are given the following information about various annuities available in the market. All the annuities pay $100 at the end of each year over
You are given the following information about various annuities available in the market. All the annuities pay $100 at the end of each year over the period of the investment. It is also given that the spot rate of interest for 1 year maturity is 3%.
Period of investment (in years) | Price (in $) |
2 | 190.89 |
3 | 281.96 |
4 | 369.53 |
Calculate the forward rates of interest for t = 2, 3 and 4. You want to accumulate $10,000 after four years by putting a single payment into a bank account. Based on the information above, calculate the deposit required.
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