acst101 help (1 Viewer)

[*hopeful*]

hey can someone ie the actuarial ppl tell me how 2 do that

Find the total value on 1 July 2002 of payments of $1000 on 1 July 1990 and $730 on 1 July 2005 if the rate of interest is 5.0% p.a. convertible 2 times a year.

(You will need to find the future value of the $1000 payment and add the present value of the $730 payment.)

 

[bong]

edit:

 

[-=«MÄLÅÇhïtÊ»=-]

its juz calculating value of both cashflows at time Jul 2002

You need to work in 1/2 yrs since ur nominal rate is compounded 1/2 yrly. Otherwise u'll have to find the effective annual rate to do yrly. But its easier to work in 1/2 yrs in this case. So you bring the 1000 forward 24 half yrs and the 730 back 6 half yrs.

So the PV of inflows on Jul 2002
= 1000(1.025)^24 + 730(1.025)^-6

Draw a timeline if it helps.
(plaigarism to do ur online quiz is bad)

edit: make sure u understand the idea behind the time value of money. ie. discounting coz u gonna use it later on and things on annuities are much harder than this question. And u start annuities pretty soon.

 

[*hopeful*]

lolz
how'd u know it wuz my online quiz ? ok thanx newayz

 

[-=«MÄLÅÇhïtÊ»=-]

coz im david westcott FIAA

 

[*hopeful*]

bong ur so slack !
man i h8 this unit its so freakn confusing

 

[bong]

wat me? its the same as malachite's, only his a bit more detailed

 

[-=«MÄLÅÇhïtÊ»=-]

..ye in reality u shouldve juz present it bong's way coz it wasnt hard

later on in acst200 we use v instead of (1+i)^-1 coz the eqn get too complicated.

 

[*hopeful*]

acst200 omg *shudders* scary thoughts man
newayz it turns out once i read the qstn n looked 4 a similar example it wasnt hard at all plus ur kind help

btw if sum1 invested bout $200 in account with 7.9% interest every month for 2.5 yrs, would it reach $1900 ?
im thinking of investing, nuthn 2 do with the quiz

 

[-=«MÄLÅÇhïtÊ»=-]

Your question implies that 7.9% is an effective monthly rate, which is a highly unrealistic rate. Can u imagine earning almost 8% on your investment every month + compounding?

But anyway, back to answering ur question, it's a just a typical compund interest question. You have a principle of $200 invested for 2.5yrs. Since your interest rate is per monthly, the easy way to do the question would be to find the number of months in 2.5yrs, which is 30. (Alternatively, the harder way would be to work in yrs but convert the monthly rate into an annual rate..try it out u get same answer).

So future value (in 2.5yrs time) = 200(1.079)^30 = $1957.37

As I said, pretty unrealistic..imagine investing 200 and gettign back almost 10 times that amount in 2.5yrs. A more realistic rate would be 7.9% nominal compounded monthly..but your question doesnt specify that so um...yeah..stick wiv effective if it doesnt say.

 

[*hopeful*]

i know, its a mad rate
but since ur so helpful i'll paste the actual qstn

How much would Marina have to deposit today in an investment fund which guarantees to pay 7.9% p.a. payable 12 times a year, to have $1900 in 2.5 years time?

i got 194.14

p.s did i mention i luv u malachite!

 

[-=«MÄLÅÇhïtÊ»=-]

Originally posted by *hopeful*

p.s did i mention i luv u malachite!

join the club eh
um..i fink u should really ask ur tutor for help..like goto ur tute and hog the tutor for the whole hr.

How much would Marina have to deposit today in an investment fund which guarantees to pay 7.9% p.a. payable 12 times a year, to have $1900 in 2.5 years time?

7.9 p.a. payable 12 times a yr means this is a nominal rate compounded monthly. So ie. in acts101 terms, j12 = 7.9%

P(1 + .079/12)^30 = 1900

Notice that it's .079/12 because 7.9% is per annum, not per month like you stated before. Since it's per annum, but paid per month, you divide the per annum rate by 12. Then you work in periods of months, so its 30 months

So P=1560.49

Alot more realistic ya?

 

[*hopeful*]

i did exactly the same thing b4 n i got 194.14
i did it slightly more carefully this time n i got 1560.49
im a failure every1
thanx my luv malachite

 

[-=«MÄLÅÇhïtÊ»=-]

aww shucks. i dun mind helping, but its better u ask ur tutor in person coz u cant get much done here anyway.

I tell u how u got ur previous answer, u treated the 7.9% as an effective rate and didnt divide by the 12.

So you had P(1.079)^30=1900, which gives u P=194.14

Don't get effective and nominal mixed up. Get ur tutor to show you in person the difference if u still dont get it.

 

[*hopeful*]

ooh okies fanx
man i dont need my tutor wen i got u
u should tutor me.......me n u in the library all alone
my shiny eyes will become xtra shiny

 

[-=«MÄLÅÇhïtÊ»=-]

o goodie i always wanted to do it in the library