Stat 274 Theory of Interest Practice Problem Set 2 Brian ...

Stat 274 Theory of Interest

Practice Problem Set 2

Brian Hartman Brigham Young University

SOA #94

A couple decides to save money for their child's first year college tuition. The parents will deposit 1700 n months from today and another 3400 2n months from today. All deposits earn interest at a nominal annual rate of 7.2%, compounded monthly. Calculate the maximum integral value of n such that the parents will have accumulated at least 6500 five years from today. [11, 12, 18, 24, 25]

2

SOA #103

An insurance company purchases a perpetuity-due providing a geometric series of quarterly payments for a price of 100,000 based on an annual effective interest rate of i. The first and second quarterly payments are 2000 and 2010, respectively. Calculate i. [10.0%; 10.2%; 10.4%; 10.6%; 10.8%]

3

SOA #134

Martha leaves an estate of 500,000. Interest on this estate is paid to John for the first X years at the end of each year. Karen receives annual interest payments from the end of year X + 1 forever. At an annual effective interest rate of 5%, the present value of Karen's interest payments is 1.59 times the present value of John's. Calculate X . [6, 7, 8, 9, 10]

4

SOA #139

An annuity having n payments of 1 has a present value of X . The first payment is made at the end of three years and the remaining payments are made at seven-year intervals thereafter.

Determine X .

a7n+3 - a3 s3

a7n+3 - a3 a7

a7n+3 - a7 a3

a7n+3 - a7 a7

a7n+3 - a7 s3

5

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