Question
You are given the following partial table Year r* Avg. r* IP AVG. IP 1 2,500 2,500 1,000 1,000 3,500 3,500 2 2,500 2,000 4,500
You are given the following partial table
Year | r* | Avg. r* | IP | AVG. IP | ||
1 | 2,500 | 2,500 | 1,000 | 1,000 | 3,500 | 3,500 |
2 | 2,500 | 2,000 | 4,500 | 5,500 | ||
3 | 2,500 | 2,600 | ||||
4 | 2,500 | 5,000 | 3,200 | 5,700 | ||
5 | 2,500 | 2,500 | 6,200 | |||
6 | 2,500 | 2,500 | 4,400 | 3,000 | 6,400 | 6,900 |
7 | 2,500 | 3,200 | 5,700 |
Now assume that the Liquidity Preference theory is correct (versus the data for the Pure Expectations Theory above), and the Maturity Risk Premium can be defined as (0.16%)(t-1), where t is the number of years until maturity. Given this information determine how much $41,000 to be deposited at the beginning of Year 3, and held over Years 3,4,5, and 6 (4 Years0, would be worth at the end of Year 6.
Answers: A) $55,429.67
B) $56,781.61
C) $58,133.55
D) $59,485.50
E) $60,837.44
Pls do not use excel to explain this to me. Thank you
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