Compounding vs. Linear: The 10-Year Horizon - Quant Trader Interview Question
Difficulty: Medium
Category: Mental Math & Estimation
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Topics: compounding, rule-of-72, taylor-series, estimation, growth-rates
Problem Description
You are evaluating a high-yield bond with a guaranteed annual return of 7%. You plan to hold this bond for 10 years. To assess the total capital multiplier quickly during a meeting, you need to estimate the compound growth factor.
Estimate the value of:
$$
1.07^{10}
$$
(Choose the closest value).
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