How to calculate the effective annual yield on all these investments
Arka DasPro
What will be the EAR on this sum for all the 3 cases
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A) 1.0345 ^ 365/140 = 9.25%
B) 1.0255 ^ 365/160 = 5.91%
C) 1.0677 ^ 365/285 = 8.75%
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In the question there is no compounding frequency given. So we assume it as yearly. Then effective annual yield and stated annual yield both will be same. Stated annual yield for A =3.45*365/140=8.9946. For b 2.55*365/160=5.81. For c 6.77*365/285=8.67. So answer is A
Wont 365/no of days be the power to the holding rate ?
Just keep it simple, and calculate EAR of all three security quickly. Using PV=-100, FV=103.45, N=140/365 and CPT=I/Y (9.25%). Similarly of remaining two.
okay thanks 👍