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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)
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/ 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
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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
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/ 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
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: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\\
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 Fall '10
 TimKnapik

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