ACTSC 231 Extra Problem Set 2 1. A dealer is willing to pay $96,000 for a $100,000 170 day US T-bill and she willing to sell the same T-bill for $96,006. a. What simple rate of discount does the dealer bid at? (use Banker’s rule) b. What is the ask yeild? (annual nominal rate of interest compounded every 170 days) 2. Consider a stream of payments, which pays $100 at time one, $200 at time two and $500 at time five. This stream of payments is to be replaced by a single payment at time three. Find the size of this payment if u t u 1 1 U .01 t . 3. An investment fund advertises that it will triple your money in 10 years. What rate of interest i u 4 U is implied ? 4. The force of interest is u u 10%. At what time should a single payment of $2500 be made so as to be equivalent to payment of $1000 in 1.25 years and $1500 in 6.5 years. 5. You are given two loans, with each loan to be repaid by a single payment in the future. Each payment will include both principal and interest. The first loan is repaid by a $3000 payment at
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