Homework Answers
The Compound interest rate at an annual adjusted inflation rate is 1.8%
Inflation rate is 2.6%
The compound interest rate before adjusting inflation rate is 4.4%
Calculation of Force of Interest:
The force of interest is calculated by:
Force of interest δ = 1n ( 1+i )
Force of interest δ = 1n ( 1+0.044) = 4.305% ( calculated using natural log)
Inflation adjusted Force of Interest:
Force of interest δ = 1n ( 1+i )
Inflation adjusted Force of interest δ = 1n ( 1+0.018) = 1.78% (( calculated using natural log)
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