SOA Exam FM Sample Question 220
Study guide: Exam FM-2
A bank lends 100,000 to Sam. The loan is repaid with level payments at the end of each year for 30 years based on an annual effective interest rate of 5%.
The bank reinvests the loan payments at an annual effective interest rate of 4%.
Calculate the bank's annual effective yield rate over the 30-year period.
- A) 4.0%
- B) 4.1%
- C) 4.2%
- D) 4.4%
- E) 4.5%
Answer this question and see the worked solution