Independent solution

How to solve this Interest Rate Measures question

Setup

Setup

Scale the target accumulation to one; the ordering is unchanged by the target amount.

Q=(1+3i)−1Q=(1+3i)^{-1}
R=(1+i)−3R=(1+i)^{-3}
S=1−3iS=1-3i
T=(1−i)3T=(1-i)^3

Model

Model

A representative rate inside the stated interval can verify the universal ordering without changing the formulas.

i=0.07i=0.07

Compute

Compute

The four required initial amounts per unit target are S = 0.790000, T = 0.804357, R = 0.816298, and Q = 0.826446.

0.790000<0.804357<0.816298<0.8264460.790000<0.804357<0.816298<0.826446

Answer

Answer

The correct ordering is S < T < R < Q, so choice C is correct.

S<T<R<Q(C)\boxed{S<T<R<Q\quad\text{(C)}}