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ACTSC 231
Extra Problem Set 2
1.
A dealer is willing to pay $96,000 for a $100,000 170 day US Tbill and she willing to sell the
same Tbill 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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 Spring '09
 Chisholm

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