1) Find the annual rate of compound interest (as a %, 2 decimal places) at which annual deposits of $500 will accumulate to $5980 in 8 years.
(Set up an equation of value equating the value of the deposits and the required accumulation. Solve using linear interpolation between 11% and 12%)
2) An insurance company will pay $84000 immediately in a lump sum to a beneficiary or $1000 at the end of each month for 10 years.
What rate j12 (as a %, 2 decimal places) is the insurance company using?
(Working in monthly time periods, draw a timeline showing the $84000 lump sum and the monthly payments of $1000 in their correct positions. Choose a focal date and write down the equation of value for the monthly rate. To calculate the monthly rate, use linear interpolation between 0.5% and 0.75%. Your final answer should be j12 and not the monthly rate.)
Thanks! Mwah!|||Are you doing a finance degree or is it just part of your maths course at school?
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