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Find the level annual effective rate of discount over a four-year period which is equivalent to an effective rate of interest 5% the 1st year, 6% the 2nd year, 7% the 3rd year, and 8% the 4th year

Find the level annual effective rate of discount over a four-year period which is equivalent to an effective rate of interest 5% the 1st year, 6% the 2nd year, 7% the 3rd year, and 8% the 4th year.

I know the rate of discount (d) = 1 - discount factor (v) = interest rate (i) x discount factor (v).

The textbook lists the solution as (1.05) x (1.06) x (1.07) x (1.08) = (1- d)-4 , and d=6.098111718%, but how do they get that answer? 

May 29 2021 View more View Less

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