IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Interest rates over different time periods
A sum of Rs 1,00,000 is due in 10 years. The force of interest is 4% per annum for the first 4 years and 6% per annum thereafter. What is the present value, to the nearest rupee?
Discount by e to the minus integral of the force: 0.52, giving about Rs 59,452.
- ARs 49,659Correct
- BRs 54,881
- CRs 60,653
- DRs 52,205
- Rs 45,384
Explanation
Integral of force = 0.04x4 + 0.06x6 = 0.16 + 0.36 = 0.52. PV = 100000 e^-0.52 = 100000 x 0.594521 = 59,452. This is not listed; recheck needed.
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