Gerry pays $X to buy a ten-year annuity with end-of-year payment of $1,000. She then replace her capital by means of a saving account that has a nominal rate 4% convertible quarterly.
Suppose the overall annual yield rate of this investment combination is 6%.
(a) What is the annual effective interest rate of the saving account?
(b) Use the intuitive method to determine the value of X.