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A.1.2 Problems 1pp

The document contains 6 practice problems related to interest rates and compound interest calculations. The problems involve determining effective interest rates based on accumulation functions, calculating future values of investments with varying interest rates over time, and solving for unknown starting amounts given future values.

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Omer Shareef
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103 views6 pages

A.1.2 Problems 1pp

The document contains 6 practice problems related to interest rates and compound interest calculations. The problems involve determining effective interest rates based on accumulation functions, calculating future values of investments with varying interest rates over time, and solving for unknown starting amounts given future values.

Uploaded by

Omer Shareef
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

[First Pass] You are given the accumulation function:


a(t) = 2t2 + 3t + 1
Determine i9, the effective interest rate during the ninth year.
A. Less than 0.23
B. At least 0.23, but less than 0.25
C. At least 0.25, but less than 0.27
D. At least 0.27, but less than 0.29
E. At least 0.29

TIA FM A.1.2 Exercises


2. [First Pass] Gertrude deposits $10,000 in a bank. During the first year,
the bank credits an annual effective rate of interest i. During the second
year, the bank credits an annual effective rate of interest (i − 5%). At the
end of two years, she has $12,093.75 in the bank.
What would Gertrude have in the bank at the end of three years, if the
annual effective rate of interest were (i + 9%) for each of the three years?
A. $16,851 B. $17,196 C. $17,499 D. $17,936 E. $18,113

TIA FM A.1.2 Exercises


3. [First Pass, SOA-IT.027] Bruce and Robbie each open up new bank ac-
counts at time 0. Bruce deposits 100 into his bank account, and Robbie
deposits 50 into his. Each account earns the same annual effective interest
rate.
The amount of interest earned in Bruce’s account during the 11th year
is equal to X. The amount of interest earned in Robbie’s account during
the 17th year is also equal to X.
Calculate X.
A. 28.00 B. 31.30 C. 34.60 D. 36.70 E. 38.90

TIA FM A.1.2 Exercises


4. Sally has two IRAs. IRA #1 earns interest at 8% effective annually and
IRA #2 earns interest at 10% effective annually. She has not made any
contributions since January 1, 1995, when the amount in IRA #1 was
twice the amount in IRA #2. The sum of the two accounts on January
1, 2003 was $75,000.
Determine how much was in IRA #2 on January 1, 1995.
A. Less than $12,750
B. At least $12,750, but less than $13,000
C. At least $13,000, but less than $13,250
D. At least $13,250, but less than $13,500
E. At least $13,500

TIA FM A.1.2 Exercises


5. Money accumulates in a fund at an effective annual interest rate of i
during the first 5 years, and at an effective annual interest rate of 2i
thereafter.
A deposit of 1 is made into the fund at time 0. It accumulates to 3.09 at
the end of 10 years and to 13.62 at the end of 20 years.
What is the value of the deposit at the end of 7 years?
A. 1.90 B. 1.98 C. 2.06 D. 2.14 E. 2.23

TIA FM A.1.2 Exercises


6. Fund A is invested at an annual effective interest rate of 3%.
Fund B is invested at an annual effective interest rate of 2.5%.
At the end of 20 years, the total in the two funds is 10,000. At the end
of 31 years, the amount in Fund A is twice the amount in Fund B.
Calculate the total in the two funds at the end of 10 years.
A. 5732 B. 6602 C. 7471 D. 7569 E. 8123

TIA FM A.1.2 Exercises

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