Tutorial02_-_soln

# Tutorial02_-_soln - Problem Set 2 ACTSC 231 Mathematics of...

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

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Problem Set 2: ACTSC 231 Mathematics of Finance, Winter 2011 Q1. Roy deposits \$10 into a fund today and \$20 fifteen years later. Interest is credited at a nominal discount rate of d (4) compounded quarterly for the first 10 years, and at a nominal interest rate of 6% compounded semiannually thereafter. The accumulated balance in the fund at the end of 30 years is \$100. Calculate d (4) . Q1. The value at the end of 30 years of the \$10 deposited now is equal to 10 " 1 1- d (4) 4 # 40 1 + 6% 2 40 = 32 . 620378 1 1- d (4) 4 ! 40 . The value at the end of 30 years of the \$20 invested at the end of the fifteenth year is equal to 20 1 + 6% 2 (2)(15) = 48 . 545249 . Thus, we end up with the following equation: 32 . 620378 1 1- d (4) 4 ! 40 + 48 . 545249 = 100 , by which we have 1 1- d (4) 4 ! 40 = 1 . 577381 , whence, d (4) = 4 . 531789%. Q2. Simplify the following expression (in terms of the annual effective interest rate i only)....
View Full Document

{[ snackBarMessage ]}

### Page1 / 3

Tutorial02_-_soln - Problem Set 2 ACTSC 231 Mathematics of...

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

View Full Document
Ask a homework question - tutors are online