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67
Reminder:
“total force of interest”
If i is constant annual effective rate of interest, the accumulated
amount at time t is (1+i)^t
69
0.05
73
8%
Force of interest (green curve) goes
7%
from exactly ....% to ....% so average
6%
5%
force of interest is approx ...% for first
4% payment and ....% for second. So roll
3% up by approx ...% * 10 = ...% for first
A = 0.05 + 0.001t + 0.0001t^2
2% investment and .... * 5 = .... for second.
1%
Total approx 100 * ..... + 100 * ..... = ....
0%
0 1 2 3 4 5 6 7 8 9 10
5%
interest is approx 6% for first payment and
4% 6.5% for second.
3% Roll up by approx 6% * 10 = 60% for first
A = 0.05 + 0.001t + 0.0001t^2
2% investment and 6.5% * 5 = 33% for second.
1%
Total approx 100*1.60+100 * 1.33 = 293.
0%
0 1 2 3 4 5 6 7 8 9 10
77
9% Average force of interest is about ....%
8% from 0 to 6 then about ....% from t=6 to 12.
7%
100 * 6 = £...... cash is paid on average at t = ...
6%
So roll up by about ... for 3 years
5%
4%
and ... for 6 years = .... ^3 * .....^9.
3% ie accumulated amount is about
2% 600 * .......* ........ = £............
1%
0%
0 1 2 3 4 5 6 7 8 9 10 11 12
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