IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Present value and accumulated value of cashflow streams
A nominal rate of 12% per annum convertible monthly is equivalent to a force of interest closest to which value?
With a monthly rate of 1%, the force of interest is 12 times ln(1.01), which equals 0.1194, or 11.94% per annum.
- A11.94%Correct
- B12.00%
- C12.68%
- D11.50%
- 12.55%
Explanation
Monthly rate is 1%, so δ = 12 × ln(1.01) = 12 × 0.00995033 = 0.119404, i.e. 11.94%. The 12.68% figure is the effective annual rate, not δ.
Did you get it right without looking?
One question tells you little. A timed set on Present value and accumulated value of cashflow streams shows your real accuracy, how long you take and where you lose marks.
More Present value and accumulated value of cashflow streams questions
- A debt of Rs 12,000 due at the end of year 3 is to be settled by paying Rs 5,000 now and a payment X at the end of year 2. At an effective a…
- A payment of Rs 1,00,000 is due in 4 years. The nominal rate of interest is 6% per annum convertible quarterly. What is the present value of…
- An investor receives Rs 100 at the end of each month for 2 years. The interest rate is 12% per annum nominal, convertible monthly. What is t…
- The nominal rate of interest convertible quarterly is 8% per annum. What is the equivalent effective annual rate, to two decimal places?
- The force of interest is a constant 6% per annum. Money is paid continuously at a constant rate of ₹1,000 per annum for 5 years into an acco…
- Rohan invests Rs 50,000 in a deposit earning 8% per annum effective. What is the accumulated value at the end of 3 years?