An investor deposits 50 in an investment account on January 1. The following summarizes the activity in the account during the year: Date Value immediately Deposit before deposit March 15 40 20 June 1 80 80 October 1 175 75 On June 30, the value of the account is 157.50. On December 31, the value of the account is X. Using the time-weighted method, the equivalent annual effective yield during the first six months is equal to the time-weighted annual effective yield during the entire one-year period. Calculate X. (A) 234.75 (B) 235.50 (C) 236.25 (D) 237 (E) 237.75
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Given: Initial deposit = $50 Value on June 30 = $157.50 Using the formula for time-weighted method: (1 + i)^2 = (50 + 80) * (157.50 / 60) Solving for i: (1 + i)^2 = 2.6667 1 + i = √2.6667 1 + i = 1.6329 i = 0.6329 Show more…
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