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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) . Q2. Simplify the following expression (in terms of the annual effective interest rate i only). 1 + i (2) 2 1 + i (3) 3 1 + i (6) 6 1 d (2) 2 1 d (3) 3 1 d (6) 6 Q3. Suppose money accumulates at a varying force of interest given by δ t = 0 . 05 + 0 . 01 t for 0 ≤ t ≤ 4. Find the present value of two payments of 100 each to be paid at times t = 2 and t = 4. Q4. Find d 5 if (i) the rate of simple interest is 10%; (ii) the rate of simple discount is 10%; (iii) the force of interest is constant δ = 0 . 1....
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This note was uploaded on 07/13/2011 for the course ACTSC 231 taught by Professor Chisholm during the Winter '09 term at Waterloo.
 Winter '09
 Chisholm

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