Answer:
Net Yield = 6.27%
Explanation:
This question can be broken down into 2 parts:-
1) First 16 years return, which is more complex one
2) Next 4 years, which is simpler one
1) First 16 years return:-
Interest Paid on the initial fund is 6%. Total Interest earned can be easily calculated:-
(64+63+62+....+1)*1500*0.015=46,800 use 1+2+3...+n = n(n+1)/2
Now this interest can be further invested [email protected]% anually
1500 for 3 months each month we get 7.5 for 1500 invested so series will be (7.5+7.5+7.5+15+15+15+...480+480+480).
Return will be 5.2%/12(7.5*192+7.5*191+7.5*190+15*189+15*188+15*187+.....+480*3+480*2+480*1), this can further be written as 0.0043*7.5*{1(192+191+190)+2(189+188+187)....+64(3+2+1)), on solving this we will get 13,182
We have total principal of 96000 and total interest of 59,982.
Net yield = 6.15%
2) For next 4 yaers:-
Principal will earn constant return of 6%, i.e., 96000*6%=23,040
This interest + earlier interest will earn 5.2% anually
96000*5.2%/12*(1+2+3+...+48) = 2,446.08
59,982*5.2%*4=12476.25
Total Interest earned =111,126
Net Yield = 6.27%
