# act230 TT2 - UNIVERSITY OF TORONTO ACTUARIAL SCIENCE Family...

This preview shows pages 1–3. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
UNIVERSITY OF TORONTO ACTUARIAL SCIENCE ACT230 F08 TT2 v05 post test mary jane corrected for web Privacy Code A (Autosaved) Page 2 of 10 1. (00000 02-082 ;Sharp401620320730v02) (Lectures, Question of class) You deposit \$1,000 at the end of each year for 10 years. The account (a) pays 5% per annum compounded semi- annually for the first 5 years, and then (b) 7% per annum effective for the last 5 years. Your spouse deposits \$X at the end of each month for 10 years in an account paying (c) 4% per annum effective. After the 10 years, you and your spouse have equal amounts. Calculate X. (A) Less than 90.000 (B) 90.000 but less than 100.000 (C) 100.000 but less than 110.000 (D) 110.000 but less than 120.000 (E) 120.000 or more (B) Solution Recall (1+ . In this question the payment periods and compounding periods differ. In order to be able to use our formulas from geometric series summations, we have to calculate the interest rate on a per payment period basis. Period (a) Annual payments, semiannual interest j (2) /2=0.025, j (1) = 1.025 2 – 1 = 5.0625% A you (t=5)=1,000 s 5 Ր (at j (1) = 0.050625) = 1000 = \$ 5,532.53 Period (b)Annual payments, annual interest A you (t=10)=5,532.53*1.07 5 +1,000 s 5 (at j (1) = 0.07) = 5,532.53*1.07 5 + 1,000 = 7,759.66 + 5,750.74 = 13,510.40 Spouse (c) Monthly payments, annual interest j (1) = 0.04, so convert to monthly : j (12) /12=1.04 1/12 -1 = 0.003274 A spouse (t=120/12)
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 07/18/2010 for the course ECONMICS ECM359 taught by Professor Matazi during the Summer '10 term at University of Toronto.

### Page1 / 10

act230 TT2 - UNIVERSITY OF TORONTO ACTUARIAL SCIENCE Family...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online