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The bank compounds interest annually

Assume that you are nearing graduation of your MBA program and have applied for a job with a local bank. As part of the bank’s evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of...

The trust fund with a single investment

  (Problem 12.14) The parents of three children, ages 1, 3, and 6, wish to set up a trust fund that will pay X to each child upon attainment of age 18, and Y to each child upon attainment of age 21. They will establish the trust fund with a single investment of Z....

Jennifer will repay her loan

  (Problem 12.4) Brian and Jennifer each take out a loan of X. Jennifer will repay her loan by making one payment of 800 at the end of year 10. Brian will repay his loan by making one payment of 1,120 at the end of year 10. The nominal semi-annual rate being charged...

The force of interest

  (Problem 11.2) Find the accumulated value of 1 at the end of n years if the force of interest is δt = 1/1+t. (Problem 11.9) Jennifer deposits 1000 into a bank account. The bank credits interest at a nominal annual rate of i compounded semi-annually for the first 7...

Credited interest at a force of interest

Problem 10.6) Bruce deposits 100 into a bank account. His account is credited interest at a nominal rate of interest of 4% convertible semiannually. At the same time, Peter deposits 100 into a separate account. Peter’s account is credited interest at a force of...

The amount of interest earned on A

  1. (Problem 8.3) The amount of interest earned on A for one year is $562.50, while the equivalent amount of discount is $500. Find A. 2. (Problem 10.2) If the constant force of interest is 6%, what is the corresponding annual effective rate of...
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