From Textbook: “Currently you have $50,000 that you would like to invest for 2 years and are considering buying a government security maturing in 1 year that pays 3% annually. If you do this, you will also have to purchase another 1 year security at the end of the first year. The alternative is to invest in a government security that matures in 2 years; currently, 2 year government securities are paying 3.5% annually. If you invest your money for 1 year and then after 1 year reinvest it for another year, what rate will you have to earn in order to make the two alternatives equal?”
How do I go about solving this? It’s for financial management.
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