Tutorial 6

Tutorial 6 - 07/08 Semester II THE UNIVERSITY OF HONG KONG...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 07/08 Semester II THE UNIVERSITY OF HONG KONG DEPARTMENT OF STATISTICS AND ACTUARIAL SCIENCE STAT1802 Financial Mathematics Tutorial 6 Mar 14, 2008 1 Review: Two methods of repaying a loan 1.1 Amortization method 1. Outstanding loan balance (OB) – prospective method & retrospective method 2. Amortization Schedules (AS): payment at the end of each period = interest paid in this period + principal repaid in this period. 1.2 Sinking Funds The amount of each period payment = the interest paid on the loan to the leader + the sinking fund deposit. The OB at any point is the original principal of the loan minus the accumulated value of the sinking fund, i.e., OB k = L- Ds k | j . 1 2 Exercise 1. A loan of $1000 is being repaid in ten years by semi-annual installments of $50, plus interest on the unpaid balance at 4% per annum compounded semi-annually. The install- ments and interest payments are reinvested at 5% per annum compounded semi-annually....
View Full Document

Page1 / 2

Tutorial 6 - 07/08 Semester II THE UNIVERSITY OF HONG KONG...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online