Exam1_Summer2011

Exam1_Summer2011 - year. 6. (20 points) On January 1, 2009...

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1. What is your name and student ID? 2. (10 points) Suppose that a ( t ) = 1 + . 01 t + . 002 t 2 . (a) What is the effective interest rate over the sixth year? (b) What is the effective discount rate over the eleventh year? (c) What is the force of interest of t = 5?
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3. (10 points) Kith needs $2 , 000 in 5 years to pay for a new computer. He plans on investing money in 2 years to finance this. How much should he invest at year 2 if (a) money grows according to simple discount with rate 5%? (b) money grows according to simple interest with rate 5%? (c) money grows according to compound interest with rate 5%?
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4. (10 points) Ephraim agrees to lend Mart´ ın $5 , 000 in return for $3 , 000 in 1 year and $4 , 000 in 2 years. What is the implied yield rate of this arrangement? 5. (5 points) The annual compound interest rate is 6%. Find the nominal discount rate convertible 6 times per year. Find the nominal compound rate convertible 2 times per
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Unformatted text preview: year. 6. (20 points) On January 1, 2009 you have $12 , 430 in a special fund. On August 1, 2009 this has grown to $16 , 345 and you deposit $2 , 000. On December 1, 2010 the fund balance is 19 , 899 and you withdraw $5 , 000. On January 1, 2012 the fund balance is $23 , 320. Approximate the annual yield of this arrangement. Calculate the time weighted annual yield as well. 7. Graduate Fund A accumulates at a rate of 12% convertible monthly. Fund B accumu-lates with a force of interest of ( t ) = t/ 6. At time t = 0 equal deposits are made in each fund. Find the next time that the two funds are equal. 8. Bonus: Attempt to name a phrase or gesture characteristic to the instructor. 9. Bonus: What movie does the following phrase come from (hint: Nilbog)? We need some time for some things to happen...
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Exam1_Summer2011 - year. 6. (20 points) On January 1, 2009...

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