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ica1s - Name(Last/family name first Math 210 Theory of...

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Name (Last/family name first): Math 210 Instructor: Ryan Hubscher Theory of Interest Spring, 2008 In Class Assignment # 1 (max. points = 4) Thursday February 7, 2008 This assignment is open note/open book, and you may work together in groups of no more then 4. However, each student must hand in his/her own answer sheet. No credit will be given without supporting work. 1. (1 point) An annuity-due pays 100 at the beginning of each year forever. The effective annual rate of interest is 25%. What is the present value of the annuity? Solution 1: d = i 1 + i = . 25 1 . 25 = . 2 100 ¨ a = 100 1 d = 500 Solution 2: 100 ¨ a = 100(1 + a ) = 100
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