Interest-rate problems (which may require a calculator):
a. You invest $2000 at 13.5 percent per year. What is your total balance after 6 months?
b. Interest is said to be compounded when you earn interest on whatever interest has already been paid; most interest rates quoted today are compounded. If you invest $10,000 for 3 years at a compound annual interest rate of 10 percent, what is the total investment at the end of each year?
c. Consider the following data: The consumer price index in 1977 was 60.6, and 1981 it was 90.9. Interest rates on government securities in 1978 through 1981 (in percent per year) were 7.2, 10.0, 11.5, and 14.0. Calculate the average nominal and real interest rates for the 4-year period 1978-1981.
d. Treasury bills (T-bills) are usually sold on a discounted basis; that is, a 90 day T-bill for $10,000 would sell today at a price such that collecting $10,000 at maturity would produce the market interest rate. If the market interest rate is 6.6 percent per year, what would be the price on a 90-day $10,000 T-bill.