3. Theory of Interest - Exercises.pdf - THE CHINESE UNIVERSITY OF HONG KONG Department of Statistics RMSC2001 Introduction to Risk Management 3 Theory

3. Theory of Interest - Exercises.pdf - THE CHINESE...

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THE CHINESE UNIVERSITY OF HONG KONG Department of Statistics RMSC2001: Introduction to Risk Management 3. Theory of Interest - Exercises 1. Calculate the present value of an annuity-immediate of amount \$100 paid annually for 5 years at the rate of interest of 9%. Also calculate its future value at time 5. 2. Calculate the present value of an annuity-immediate of amount \$100 payable quarterly for 10 years at the annual rate of interest of 8% convertible quar- terly. Also calculate its future value at the end of 10 years. 3. A man wants to save \$100,000 to pay for his son’s education in 10 years’ time. An education fund requires the investors to deposit equal instal- ments annually at the end of each year. If interest of 7.5% is paid, how much does the man need to save each year in order to meet his target? 4. A company wants to provide a retirement plan for an employee who is aged 55 now. The plan will provide her with an annuity-immediate of \$7,000 every year for 15 years upon her retirement at the age of 65. The company is funding this plan with an annuity-due of 10 years. If the rate

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