Exam1_Summer2011

# Exam1_Summer2011 - year 6(20 points On January 1 2009 you...

This preview shows pages 1–6. Sign up to view the full content.

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?

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

View Full Document
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%?
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

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

View Full Document

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: 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 δ ( 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...
View Full Document

{[ snackBarMessage ]}

### Page1 / 6

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

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online