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An investor has the choice between two investments. Investment Exe offers interest of 4% per year compounded semi-annually for a period of three years. Investment Wye offers one interest payment of 20% at the end of its four-year life.
What is the annual effective interest rate offered by the two investments?
Investment Exe Investment Wye
A 4.00% 4.66%
B 4.00% 5.00%
C 4.04% 4.66%
D 4.04% 5.00%
Hi , sir I have a question why Wye’s the annual effective interest rate= 1.20 ^0.25 – 1 = 0.0466 and why Wye’s the annual effective interest rate=(1+.2/.25)^0.25 – 1 this calculation is wrong
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