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# ct0010t04 - UNSW ACTL1001 Actuarial Studies and Commerce...

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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. (semi-annual compounding) at the end of every six months. No repayments have been made on the loan for 5 years.

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ct0010t04 - UNSW ACTL1001 Actuarial Studies and Commerce...

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