acst help (1 Viewer)

[lil d]

hey guys im new to uni, and just a few questions i need help with?

1)an obligation of $1100 falls due at the end of 7 yrs. find an equivalent debt at the end of 5 yrs, if the interest rate is 11% p.a. convertible monthly?

2) a sum of $1600 is deposited today into an account earning interest at 8.1% p.a. convertible 2 times a yr. what deposit should be made in 1 yrs time if the acount is to accumulate to $5800 in 5 yrs from today?

3)if the interest rate is 6.1% p.a. convertible daily, find the equivalent nominal rate of interest p.a. if it were payable quarterly?

4)if the interest rate is 9.4% p.a. convertible 4 times a year, find the equivalent effective annual rate of interest?

thanks heaps.sorry for all the questions..this subject is so confusing though!!

 

[CieL]

Oh.. I haven't done acst101 for so long now..
This is a wild guess of Q1 from the top of my head...

1) Draw your own timeline - easier to understand that way...
$P $1100
|---|-------------|---------|
0 1 5 7 in years; where j12=0.11

So..... using the compound interest formula:

P = S(1+i)^-n

= 1100 (1 + 0.11/12)^ -24

= $883.66



EDIT: my timeline has screwed up... the spacing isnt working... but you should get the general idea....

 

[CieL]

Q2:

Your focal time is at the end of the first year..... or t=2...... it's 2 because it's two half years = one year....

Your timeline should be in half years... ranging from 1-10... focal at 2...
j2 = 0.081/2
X = amount added at t=2

Well... what I got was...

1600(1 + j2)^2 + X = 5800(1 + j2)^-8

*calculator work*

Hence X = $2489.51

Maybe you should check that... looks funny... have you got answers?

 

[lil d]

haha no i dont..its actually a quiz, thanks alot for ur help !! so its d right answer?..dis subject is hard.!!

 

[CieL]

How should I know if it's the right answer or not? lol
You should be able to know, you're the one doing the unit..


Q3:

you use that formula with the 'n' and 'm'.... and the huge brackets...

it's like (1+ jm/m)^m = (1+ jn/n)^n

Then you start to substitute....

m (on the left) is what you want to find... in this case, the quarterly rate (m=4)
n (on the right) is what you have..... in this case, the daily rate... (n=0.061/365)

(1+j4/4)^4 = (1+ 0.061/365)^365

<Now to isolate the left side into just j4)

(1+ j4/4) = (1+ 0.061/365)^ (365/4) <-- put the power in brackets in your calculator or else it wont work

j4/4 = [(1+ 0.061/365)^ (365/4)] -1

j4 = 4 [[(1+ 0.061/365)^ (365/4)] -1]

= 0.06146 or 6.15%

 

[CieL]

If you understand Q3, you can do Q4...

I dont want to do your HW for you... i jsut realised I got carried away..

 

[lil d]

haha,, well its an online quiz?? there arent much examples?? should i buy the texbook for it?? alot of students told me its a waste of money.. well thanx for ur help...!!!!!

 

[CieL]

Errrr dont you go to your lectures and tutorials?

All you need is there.

Well, tell me if I was right or wrong after you submit your quiz bwahahhaha

Btw.. you should of told me if was for the online test.. which counts towards your mark.. =.= Cos you're supposed to do it yourself..

 

[jemsta]

dont listen to her
shes always wrong

 

[CieL]

Bwahahha yes.... I spread failure

 

[*hopeful*]

oh god i was you 4 years ago, posting up acst101 qstns and all the oldskool actuary guys giving me answers
but seriously its easy once you go over examples in lect notes and in the text
so get the textbook which has the questions and examples etc not the elements (theory) one

 

[CieL]

Yes yes.... textbook..... good idea..... buy it off me =]