The annual interest rate from year t to year t + 1 is rt,t+1 = 5% + 0.3% . t (e.g., the rate of return from year 5 to year 6 is 5% + 0.3% . 5 = 6.5%).
(a) What is the holding rate of return of a 10-year investment today?
(b) What is the annualized interest rate of this investment?