Revision as of 21:47, 18 November 2023 by Admin (Created page with "'''Solution: D''' For the first 10 years, each payment equals 150% of interest due. The lender charges 10%, therefore 5% of the principal outstanding will be used to reduce the principal. At the end of 10 years, the amount outstanding is 1000(1-0.05)<sup>10</sup> = 598.74. Thus, the equation of value for the last 10 years using a comparison date of the end of year 10 is <math display = "block"> 598.74 = X a_{\overline{10}|10\%} = 6.1446X, X = 97.44. </math> {{soacop...")
Exercise
ABy Admin
Nov 18'23
Answer
Solution: D
For the first 10 years, each payment equals 150% of interest due. The lender charges 10%, therefore 5% of the principal outstanding will be used to reduce the principal. At the end of 10 years, the amount outstanding is 1000(1-0.05)10 = 598.74.
Thus, the equation of value for the last 10 years using a comparison date of the end of year 10 is
[[math]]
598.74 = X a_{\overline{10}|10\%} = 6.1446X, X = 97.44.
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.