Revision as of 20:50, 18 November 2023 by Admin (Created page with "Today’s deposit of 9550 earns an annual effective interest rate of i for five years. At the end of the fifth year, the entire accumulated balance is reinvested into a 20-year annuity-due. The annuity-due has level annual payments of 756.97 at an annual effective interest rate of 4%. Calculate i. <ul class="mw-excansopts"><li>1.5%</li><li>2.3%</li><li>7.7%</li><li>12.0%</li><li>19.7%</li></ul> {{soacopyright | 2023 }}")
ABy Admin
Nov 18'23
Exercise
Today’s deposit of 9550 earns an annual effective interest rate of i for five years. At the end of the fifth year, the entire accumulated balance is reinvested into a 20-year annuity-due. The annuity-due has level annual payments of 756.97 at an annual effective interest rate of 4%.
Calculate i.
- 1.5%
- 2.3%
- 7.7%
- 12.0%
- 19.7%
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
Nov 18'23
Solution: B
[[math]]
\begin{aligned} & 9550(1+i)^5=756.97 \ddot{a}_{2000.04} \\ & 9550(1+i)^5=10,698.97 \\ & (1+i)^5=1.12031 \\ & i=0.02298\end{aligned}
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.