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QF2101 1112S1 Assignment 1 Questions
QF2101 1112S1 Assignment 1 Questions
Email: matnws@nus.edu.sg
Tel: 65164673
QF2101 Basic Financial Mathematics
ASSIGNMENT 1
Question Paper
INSTRUCTIONS
1. This paper contains a total of 5 questions and comprises 3 printed pages
2. Do NOT hand in this question paper.
NG Wee Seng
Email: matnws@nus.edu.sg
Tel: 65164673
2
Question 1 [ 5 marks]
The sum of the present value of $1 paid at t = 2k and the present value of $3
paid at t = 4k is $2.
Find the exact accumulated value of $2 at t = 3k.
Question 2 [ 5 marks]
It can be shown that for |y| < 1,
( )
4
2 3
1 i
i 3
y 1
y 4y y
y i
+ +
=
=
.
A perpetual annuity pays $ ( 3n
3
+ 2) at time t = 2n, n e Z
+
, with the first
payment made at t = 6. If the interest rate is 6% compounded monthly,
find the present value of this annuity, giving your answer to 3 decimal places.
Question 3 [5 marks]
Let N be a positive integer greater than 1.
Annuity A pays $1 at t = 11, 12, 13, . . . , 10 + N
$2 at t = 21, 22, 23, . . . , 20 + N
$3 at t = 31, 32, 33, . . . ., 30 + N
Annuity B pays $4 at t = 1, 2, , N
It is given that the interest rate is perpetually
|
.
|
\
|
R
1
ln compounded continuously,
where 0 < R < 1. If the present value of annuity A is $X and the present value of
annuity B is $Y, express
Y
X
as a polynomial in R. (Your answer should NOT
contain the unknown , N)
NG Wee Seng
Email: matnws@nus.edu.sg
Tel: 65164673
3
Question 4 [ 10 marks]
Investment fund A accumulates value at a force of interest, ( ) t given by
( )
s s
+
s s +
=
20 t 10
t 100
2t
10 t 0 10) (t
t
2
1000
1
.
Investment fund B accumulates value at a continuously compounded rate of
R%. It is given that at time t = 20, the accumulated value of $1 invested in fund A
equals 2.5 times the accumulated value of $1 invested in fund B.
(i) Find the exact value of R.
(ii) If $1 invested in fund A at t = 5 is worth $2 at t = T, find the exact value of
T, giving your answer in the form B Ae +