1. Create a problem that demonstrates end of period convention along with compounding periodicity?
2. Susan wants to start a business, and needs your help. She plans to operate the business for 5 years until she is done with her education. She needs $5000 to purchase equipment for the business, and she is promising to pay you $1500 at the end of each summer (annually) for 5 years in return. Calculate your annual rate of return.
3. Explain what is meant by ‘the law of one price’ and critically evaluate its perceived role in determining exchange rates.