Question
Q1) a) Define the accumulation amount and accumulation factor for a loan/investment. Give the formula for the accumulation factor for simple interest with annual rate
Q1)
a) Define the accumulation amount and accumulation factor for a loan/investment.
Give the formula for the accumulation factor for simple interest with annual rate r.
b) Explain the difference between the daycount conventions ACT/360 and ACT/365.
Carmen invests $55000 on January 13, 2017 at an annual simple interest rate of 17.00%. Use the daycount convention ACT/365.
c) How much interest does Carmens account make in 1 day? (to 5 decimal places)
d) How much money is in her account on March 31, 2017?
e) On what day does her account balance first equal or exceed $59675.00?
Q2)
a) Give the formula for the annual simple discount rate d in terms of the annual simple interest rate r.
Use the daycount convention ACT/365.
b) On July 19, 2020 Vlad buys a T-bill maturing on Dec 15, 2020. The T-bill has a face value of $10000 and is discounted at the annual simple discount rate d = 4.00%. What price does he pay for the T-bill? (to 2 decimal places)
c) Walter pays the same price as Vlad, on the same day for a different T-bill with the same face value and a maturity date of Dec 8, 2020. What is the simple annual discount rate for Walters investment? (to 2 decimal places; e.g. 3.06%)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started