1. Assuming compound interest or discount, find the accumulated value of 5,000 at the end of 6 years (a) if the nominal annual rate of discount is 8%, convertible quarterly; (b) if the nominal annual rate of interest is 8%, convertible quarterly; (c) if the nominal annual rate of interest is 100%, comvertible annually: (@) if the nominal annual rate of discount is 99%, convertible annually. 2. If, at compound interest or discount, 5,000 accumulates at the end of 6 years to 7,000, determine (a) the nominal annual rate of interest, convertibie every 3 months; (b) the nominal annual rate of discount, convertible every every third of a year (c) the nominal annual rate of interest, convertible every 3 years. 3. (a) Atagiven quarterly rate of compound interest an account with initial value of 1,000 ‘will accumulate to 2,500 in 20 years. What was the value of the account afer 10 years? (b) At agiven effective quanerly rate k of compound interest an account with inital ‘value of 1,000 will accumulate to 2.500 in 20 years. What would the value of the account be afier 20 yearsif the intial deposit of 1,000 had grown under aneffective quarerly rate k of compound discownt? 4. A Credit Union makes money available to its members at the current rate charged by banks in the area However, this Credit Union views its mandate to be primarily pro- viding short-term financing. Accordingly, it wishes to discourage loans for longer than 1 year. It proposes to do this by increasing the interest rate gradually after that time, implemented by 2 gradual increase in the force of interest. (@) Determine the force of interest which the Credit Union will charge for the firstyear, if the interest rate throughout that year is to be an etfective monthly rate of 05%. (b) Asa loan period extends beyond one year, the Credit Union will increase the force of interest linearly (ie.,in such a way that 24, is a constant k when t > 1), so that the amount owing at time + = 2 on a loan of 1 at time # = 0 is equivalent to what ‘would have been owing had the effective monthly interest rate been 0.6% over the entire 2-year period of that loan. Determine the value of k, and the force of interest at any time ¢ > 0. (Hint: You are assuming that 6, isa function which is continuous fore > 0, such that $6, ~ k, aconstant, when ¢ > 1.) (©) Determine the equivalent constant effective annual interest rate that a borrower will, pay over the full period of her loan if she fully repays.a loan taken out at time. at the following time: i b= Lycars; fi, r= 15 years; iii, r= 2 years,29. A manufacturer sells a product to a ret 30. 31. 32. 33. +r who has the option of paying 30% below the retail price immediately, or 25% below the retail price in six months, Find the annual effective rate of interest at which the retailer would be indifferent between the two options. If an investment will be doubled in 8 years at a force of interest 5, in how many years will an investment be tripled at a nominal rate of interest numerically equal to 6 and convertible once every three years? Fund A accumulates at 6% effective and Fund B accumulates at 8% effective. At the end of 20 years the total of the two funds is $2000. At the end of 10 years the amount in Fund A is half that in Fund B. What is the total of the two funds at the end of 5 years? ‘An investor deposits $10,000 in a bank. During the first year, the bank credits an annual effective rate of interest /, During the second year, the bank credits an annual effective rate of interest i-.05. At the end of two years the account balance is $12,093.75. What would the account balance have been at the end of three years, if the annual effective rate of interest were i + .09 for each of the three years? ‘A signs a one-year note for $1000 and receives $920 from the bank. At the end of six months A makes a payment of $288. Assuming simple discount, to what amount does this reduce the face amount of the note?