Consider a model of random interest rates Ri between year i and i+1. The Ri are i.i.d. random variables such that 1+Ri is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £5000 at time 0. A) Determine the expectation value of Ri B) Determine the expectation value of the amount of money on your account after 10 years. C) Determine the probability that the money accumulated at time i=10 is more than £ 7500.

Consider a model of random interest rates Ri between year i and i+1. The Ri are i.i.d. random variables such that 1+Ri is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £5000 at time 0. A) Determine the expectation value of Ri B) Determine the expectation value of the amount of money on your account after 10 years. C) Determine the probability that the money accumulated at time i=10 is more than £ 7500.

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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