UNSW
ACTL1001 Actuarial Studies and Commerce
Tutorial Exercises 4
Exercise 1
Determine the nominal annual rate of interest assuming quar
terly compounding equivalent to an annual effective interest rate of 5.5% p.a.
Exercise 2
Determine the annual effective interest rate corresponding to a
nominal rate of 5% p.a. assuming weekly compounding.
Exercise 3
Assume that you have the option of paying interest on a loan
every month or every quarter at a (nominal) rate of 6.8% p.a. Which option
would you prefer? Explain why.
Exercise 4
Consider a loan of
$
100,000 with repayments of
$
20,000 made
at the end of each year for 5 years. Assume that the interest rate on the loan
is 10% p.a. effective. Determine the balance of the loan outstanding at the
end of 5 years.
Exercise 5
A loan has a current balance outstanding of
$
15,000. Interest
is charged on the loan at 8% p.a. (semiannual compounding) at the end of
every six months. No repayments have been made on the loan for 5 years.
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 One '09
 Nicole
 Debt, $2.5, Semiannual compounding

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