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John invests a total of $10,000. He purchases an annuity with payments of $1,000 at the beginning of each year for ten years at an effective interest rate of 8%. As annuity payments are received, they are reinvested at an effective annual rate of 7%. The balance of the $10,000 is invested in a ten-year certificate of deposit with a nominal annual interest rate of 9% compounded quarterly. Calculate the annual effective yield on the entire $10,000 investment over the ten-year period.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92361540

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