A fund quotes annual force of interest as follows. Year 1 2 3 8t 5% 12%...

Question

Question

A fund quotes annual force of interest as follows. Year 1 2 3 8t 5% 12% 10% 9% A deposit of K accumulates to 2400 over 4 year

Answer 1

Answer #1

What is K?

Answer: 1,702.098

Workings

Yearend Value = year Beginning Value + Interest

Interest = Year Beginning Value * interest rate for that year

With help of the above formula we can find the value of year beginning balance.

Explanation for the calculation

4th year

If we invest amount K at the beginning of the year 4 at the interest rate of 9% we will get 2400

I.e. K + K * 9% = 2400

K + .09K = 2400

1.09K = 2400

K =2400 / 1.09

K = 2,201.834 (year end balance of year 3 / year beginning value for year 4)

Accordingly we can find out the value for each year.

Answer 2

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