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85 views

Old2ans PDF

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Hasan Saeed
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UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN

Actuarial Science Program


DEPARTMENT OF MATHEMATICS
Math210
Theory of Interest
From "Exam FM Sample Questions"
Basic Interest Theory,· Annuities and Perpetuities

(1) Eric deposits 100 into a savings account at time 0, which pays interest at a nominal rate of
f r/ i, compounded semiannually. Mike deposits 200 into a different savings account at time
-._ \4"'-'
I
I:::. 0, which pays simple interest at an annual rate of i. Eric and Mike earn the same amount
�t"""�
. ti.)
of interest during the last 6 months of the 8th year. Calculate i.
" 1
(A)9.06% • f-,1 , \C.( A \..WA 'IJ teYll'-AJ J � 00 • •
l ( °'i' ) :: J 00 � /AJ
{fil 9.26% /N-r£1Lf'J.,- £V<t'-"1 HALF- )'nf,(.
© 9.46% •
A('>. r) = Joo (I+ -i-)'.r
1- �
f°A.,A :
(D)9.66% "" IS'

(2)
(E)9.86% I.,,r B' = Io o ( / -r � ) • { )
.,..
David can receive one of the following two payment streams:
-
) o o t.
�-,. t. : • o 1 '( .rJ"J'
-
(i)100 at time 0, 200 at time n, and 300 at time 2n
(ii) 600 at time 10
At an annual effective interest rat� of i, the present values of the two streams are equal.
Given vn = 0.76, determine i. ft 2.el\
: /o o + ')ooo\/ + Joo·'}
10
E CluA� 'IVJ : l,oo ·" �
(@3.5% �o.'l, \s�.•H,)
z.r tr
(B)4.0%
(C)4.5% -= t./ 2 r. o. 11 o

(D)5.0%
(E)5.5%

(3) A perpetuity-immediate pays X per year. Brian receives the first n payments, Colleen
receives the next n payments, and Jeff receives the remaining payments. Brian's share of
the present value of the original perpetuity is 40%, and Jeffs share is K. Calculate K. "]
(A)24o/co
-
( o'T'A\..
'f'\J -- 'ItII,c. • 1'\J 91lt'4"' -: D, 'f o • >V� : �· [ •
I•
,-�
" n t\ I
(B)28%
-"> o. 'f o :. I - " ::;:> " :;, c:
i932%
(@36%
(E)40%

(4) To accumulate 8000 at the end of 3n years, deposits of 98 are made at the end of each of
the first n years and 196 at the end of each of the next 2n years. The annual effective rate
of interest is i. You are given (I+ il = 2.0. Determine i.

(A)11.25%
qr·sw� + '"' · s�� -=- 1, oo �
(B)11.75% + ( / -t-,•) 1"'
( 31'\
J,I +,� - I . - I :::. kr> 00 .,

,.,.

,,."> c.. ::

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