Consider a model of random interest rates R, between year i and i+1. The R, are i.i.d. random variables such that 1 + R, is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £4000 at time 0. (a)ma Determine the expectation value of R₁. State your result with 4 significant digits. Do not write the percentage sign. For example, if your answer is 4.123% write 4.123. Answer: (b) Determine the expectation value of the amount of money on your account after 10 years. Do not write the £ sign. State your result to 6 significant digits. Answer: Determine the probability that the money accumulated at time i = 10 is more than £ 7500. State your answer to four significant digits. (c) Answer:
Consider a model of random interest rates R, between year i and i+1. The R, are i.i.d. random variables such that 1 + R, is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £4000 at time 0. (a)ma Determine the expectation value of R₁. State your result with 4 significant digits. Do not write the percentage sign. For example, if your answer is 4.123% write 4.123. Answer: (b) Determine the expectation value of the amount of money on your account after 10 years. Do not write the £ sign. State your result to 6 significant digits. Answer: Determine the probability that the money accumulated at time i = 10 is more than £ 7500. State your answer to four significant digits. (c) Answer:
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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Transcribed Image Text:Consider a model of random interest rates R, between year i and i+1. The R, are i.i.d. random variables such that 1 + R, is LogNormal(0.03,0.0010)
distributed. Suppose you deposit an amount of £4000 at time 0.
(a)ma Determine the expectation value of R₁. State your result with 4 significant digits. Do not write the percentage sign. For example, if your answer
is 4.123% write 4.123. Answer:
(b) Determine the expectation value of the amount of money on your account after 10 years. Do not write the £ sign. State your result to 6
significant digits. Answer:
(c) Determine the probability that the money accumulated at time i = 10 is more than £ 7500. State your answer to four significant digits.
Answer:
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