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An investor buys a bond of a certain company for $1000 and [#permalink]
02 Jul 2004, 00:45

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Difficulty:

5% (low)

Question Stats:

0% (00:00) correct
0% (00:00) wrong based on 0 sessions

An investor buys a bond of a certain company for $1000 and leaves for a one-year vacation. At the moment of buying, the bonds are going to increase at the annual rate of 8% compounded quarterly. However, after the first quarter, the investment starts losing its value at the same rate. When the investor is back, what the difference (rounded to dollars) he will see between expected and real balances?

This is not a GMAT-like question.
This sort of question is being tested on CFA, where it takes 10 seconds to solve, but you're given a calculator as well.

Well, if answer choices had something around 120, I would have taken it.
It's just to know that expected is slightly over 1080 since it's compounded quarterly and realized is about 1020-60 = 960. Difference between the 2 is approx. 120
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