Summer 2011 Exam 1 solution

Summer 2011 Exam 1 solution - 1. What is your name and...

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Unformatted text preview: 1. What is your name and student ID? 2. (10 points) Suppose that a(t) = 1 + .Olt + 002152. (a) What is the effective interest rate over the sixth year? (b) What is the effective discount rate over the eleventh year“.7 (C) What is the force of interest of t = 5? c6 ,2 # 01/5) am) i (fix/46 6) 59H 3 :L j' 4) (“/m ,1 5:7 Y ' 0,4727 [/+ 01 I ’ ,0] F ,Qc-“IK' / 4 1 / / 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%? )l WIS? : .Quflo f if: ) 4. (10 points) Ephraim agrees to lend Martin $5, 000 in return for S3, 000 in 1 year and $4, 000 in 2 years. What is the implied yield rate of this arrangement? I a r V I "aw . "/7 'v’h 5 7 7 am: UH. + WWW» 5’04ng - J ~r ~ ‘ 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 year. (/41) f a“) ‘I , 2) \ IV ,1 [JL — é ( } {l k / I) "4 /'f K J - 1 my I r 4. “(1)2 - ‘l : — [/1 j 3.. \ N UL / I 03 r , C F _ i1 ‘1 r / y. I ' / 6. (20 points) 011 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. F): 12,143) n, my) “a Ions M, W“? 2‘97i‘0 @' 2' .. z!) J/nL 'lC/i/fl L—idu/ ’3 [1000 .,. " (7/;y )g'dfl, [Lav C a ma mu") ‘9)” -’ .75 .1. 2" _17 7 85332 <_//—- * ’ _ J i125.- , , new + 804W" 7st)“ PM“) : l/ESL I , ‘\ fill - , . ,V _ '\ r (It) 1 ‘i ’ J ' {/74 >2) 6’ 6 '” $2,230» ’1 ‘ " PS: ‘ 4‘ _ /' I 7 I. r v A , /+ .- AS9413 WW") I‘ [3:32) 1 2 , ,- 7 JW ”” ’ 204/; (3/ ll’/?& ./6 34$. 1’ I“ / are”? ‘ a :7: ’ ‘3- ‘\_/ 7. Graduate Fund A accumulates at a rate of 12% convertible monthly. Rind B accumu— lates with a force of interest of 6(t) = t/6. At time t = 0 equal deposits are made in each fund. Find the next time that the two fundS are equal. R) (ST/'72) / 7;, a {/(_, J 6 4) C\\ in {.~ I} .. > :42 F K «5) X’ ...
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Summer 2011 Exam 1 solution - 1. What is your name and...

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