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Unformatted text preview: 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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This note was uploaded on 06/12/2011 for the course ASB 1001,2522, taught by Professor Nicole during the One '09 term at University of New South Wales.
 One '09
 Nicole

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