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You want to invest $15,000 in government securities for the next two years. You can either invest in a security that pays an interest rate
You want to invest $15,000 in government securities for the next two years. You can either invest in a security that pays an interest rate of 6.75% per year for the next two years, or invest in a security that matures in one year but pays 4.25%. If you decide to invest in the security that matures in one year, you would then reinvest your savings for another one year. What should be the one year interest rate next year which will make the future value equal for both securities?
9.54% | ||
9.31%. | ||
9.33%. | ||
9.29%. |
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