SOA Exam FM Sample Question 230
Study guide: Exam FM-2
A bank issues a loan to be repaid by level end-of-year payments for ten years at an annual effective interest rate of 10%.
The bank invests these payments at an annual effective interest rate of 10% for the first four years and 7% for the next six years.
Calculate the bank's annual effective yield rate on this loan over the ten-year period.
- A) 7.90%
- B) 8.20%
- C) 8.33%
- D) 8.67%
- E) 9.10%
Answer this question and see the worked solution