a) t=0? Assume the force of interest between time 0 and time 2 is 8(t)=0.04 +0.07t. Assume you are paid $1000 at time t = 2. What is the present value of this amount at time b) What nominal rate of interest compounded quarterly would be equivalent to this force of interest over the two year time period?.. : c) What rate of simple interest would cause the amount of money determined in part a) to grow to $1000 at time t = 2 ?? d) What rate of simple discount would cause $1000 at time t = 2 to have a present value equal to the amount determined in part a)? ?
a) t=0? Assume the force of interest between time 0 and time 2 is 8(t)=0.04 +0.07t. Assume you are paid $1000 at time t = 2. What is the present value of this amount at time b) What nominal rate of interest compounded quarterly would be equivalent to this force of interest over the two year time period?.. : c) What rate of simple interest would cause the amount of money determined in part a) to grow to $1000 at time t = 2 ?? d) What rate of simple discount would cause $1000 at time t = 2 to have a present value equal to the amount determined in part a)? ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:a)
t=0?
Assume the force of interest between time 0 and time 2 is 8(t) = 0.04 +0.07t.
Assume you are paid $1000 at time t = 2. What is the present value of this amount at time
b)
What nominal rate of interest compounded quarterly would be equivalent to this force of
interest over the two year time period?..
c) What rate of simple interest would cause the amount of money determined in part a) to
grow to $1000 at time t = 2 ??
d) What rate of simple discount would cause $1000 at time t = 2 to have a present value equal
to the amount determined in part a)?
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