1. Suppose you pay $100,000 for an investment that will pay you $4,000 every six months. You can reinvest the 4,000 at an APR of 5%. Assuming in 10 years you will get back the $100,000, what is the EAR (effective rate of return) on your investment?
2. An investment offers a total return of 14 percent over the coming year. Janice Yellen thinks the total real return on this investment will be only 8 percent.