(a) Assume you are saving £16,000 now, in a generous account which grantees to pay you 8% interest compounded annually.

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A Assume You Are Saving 16 000 Now In A Generous Account Which Grantees To Pay You 8 Interest Compounded Annually 1 (63.58 KiB) Viewed 17 times

(a) Assume you are saving £16,000 now, in a generous account which grantees to pay you 8% interest compounded annually. How long will it take your money to exceed £1.6m? This savings is for a flat you want to buy in London for £1,600,000 (£1.6million). Ignore inflation rate. S=P [1+(r/100)] (b) Using the figures above show that n = log (S/P) log [1+(r/100)] (c) Consider the following expression (1+y0,2²=(1+yo,1)(1+y₁,2) where y0,2 represents the two-year interest spot rate, y0,1 represents the one-year interest spot rate and y₁,2 the one-year interest forward rate. Given that: Y0,2 0.16 Yo.1 0.08 (10 marks) Solve the above expression for the one-year interest forward rate y 1,2-