Alifia Farradita Fedli / 119410006 1.2. The Accumulation and Amount Function
Alifia Farradita Fedli / 119410006 1.2. The Accumulation and Amount Function
Alifia Farradita Fedli / 119410006 1.2. The Accumulation and Amount Function
1 1
(1) a(0) = 1 >>> a(0) = [(0)2 + (0)+ 3] = (3) = 1.
3 3
1 2
(2) a(t) = (t +2t+3).
3
1
a’(t) = (2t+2) > 0 , for t≥ 0
3
so that a(t) is a an increasing function.
(3) a(t) is continuous if :
lim a( x ) = lim ¿ = lim ¿
x→ t x→ t−¿ a(x)¿ x→ t+ ¿a (x)¿
a(t)
>> example : t = -1
2
a(-1) =
3
lim a( x )
x→ t
>> example : t = -1
lim 1
lim a(x ) = x →−1 (t2+2t+3).
x→−1
3
1
= [(-1)2+2(-1)+3]
3
2
=
3
lim ¿
x→ t−¿ a(x)¿
>> example : t = -1
lim ¿ = lim 1
¿
(t2+2t+3).
x→−1−¿a (x)¿ x→−1−¿ ¿
3
1
= [(-1)2+2(-1)+3]
3
2
=
3
lim ¿
x→ t+ ¿a (x)¿
>> example : t = -1
lim ¿ = lim 1 ¿ (t2+2t+3).
x→−1+¿ a(x)¿ x→−1+¿ ¿
3
1
= [(-1)2+2(-1)+3]
3
2
=
3
Because lim a( x ) = lim ¿ = lim ¿ = a(t) = 2 , so a(t) is a
x→ t x→ t−¿ a(x)¿ x→ t+ ¿a (x)¿ 3
continuous function.
c) find In
Answer :
In = A(n) – A(n-1)
= [n2 + 2n + 3] – [(n-1)2 + 2(n-1) + 3]
= n2 + 2n + 3 – [n2 – 2n + 1 + 2n – 2 + 3]
= n2 + 2n + 3 – n2 + 2n – 1 - 2n + 2 – 3
= 2n – 1.
2. a) prove that A(n) – A(0) = I1+I2+....+In.
Answer :
I1+I2+....+In = A(1) – A(0) + A(2) – A(1) +..........+ A(n) – A(n-1) , n ≥ 1
= A(n) – A(0).
b) verbally interpret the result obtained in (a).
Answer :
RHS adalah jumlah bunga bunga yang diperoleh selama setiap periode n.
LHS adalah kenaikan dana selama n periode, yang seluruhnya terkait dengan
bunga yang diperoleh.
3. For the $5000 investment given Example 1.1, find the amount of interest earned
during the second year of investment. i.e. between times t = 3 and t = 4.
Answer :
From the example 1.1, we know that
A(2) = 11.130,00.
A(3) = 11.575,20.
A(4) = 12.153,96.
Let K be the accumulated value of the $5000. K canbe determined by ratio and
proportion.
K A ( 4 )− A(3) 12.153,96−11.575,20
= → K = 5000 = $260.
5000 A (2) 12.153,96 .
4. It is known that a(t) is of the form at2 + b. If $100 invested at time 0 accumulates
to $172 at time 3,find the accumulated value at time 10 of $100 invested at time 5.
Answer :
Diket :
a(t) = at2 + b.
$100, at time 0.
$172, at time 3.
Dik : find the accumulated value at time 10 of $100 invested at time 5 ?
≫From the equation above, it is known that the values of a=8 and b=100.
Thus,
a (5) = 25a + b = 25(8) + 100 = 300.
a(10) = 100a + b = 100(8) + 100 = 900.
a(10) 900
And the answer is 100 = 100 = $300.
a(5) 300
13. It is known that $600 invested for two years will earn $264 in interest. Find the
accumulated value of $2000 invested at the same rate of compound interest for
three years.
Answer :
AC1 = k. (1+ i)t
600 + 264 = 600 (1 + i)2
864
= (1 + i)2
600
864
1+i =√
600
i = 1.2 – 1
i = 0.2.
So that
AC2 = k. (1+ i)t
= 2000 (1 + 0.2)3
= $3456
14. Show that the ratio of the accumulated value of 1 invested at rate I for n periods,
to the accumulated value of 1 invested at rate j for n periods. i > j, is equal to the
accumulated value of 1 invested for n periods at rate r. Find an expression for r as
a function of i and j.
Answer :
>>a(n)i = (1+ i)n
>>a(n)j = (1+ j)n
>>a(n)r = (1+ r)n
(1+i)n 1+i
(1+ r)n = and 1+ r =
(1+ j)n 1+ j
So that,
1+i ( 1+i ) −(1+ j) i− j
r= -1= =
1+ j 1+ j 1+ j
15. At a certain rate of compound interest, 1 will increase to 2 in a years, 2 will
increase to 3 in b years, and 3 will increase to 15 in c years. If 6 will increase to
10 in n years, express n as a function of a, b, and c.
Answer :
From the information given :
(1 + i)a = 2 >> (1 + i)a = 2 >> (1 + i) log 2 = a
3 3
2(1 + i)b = 3 >> (1 + i)b = >> (1 + i) log = b
2 2
c c (1 + i)
3(1 + i) = 15 >>(1 + i) = 3 >> log 5 = c
10 10
6(1 + i)n = 10 >>(1 + i)n = >> (1 + i) log =n
6 6
Find n:
10
n = (1 + i) log
6
= (1 + i) log 10 - (1 + i) log 6
3 (1 + i)
= (1 + i) log 5 + (1 + i) log 2 – [(1 + i) log + log 4]
2
= c + a - b – 2a
n=c–b–a
16. An amount of money is invested for one year at a rate of interest of 3% per
quarter. Let D(k) be the difference between the amount of interest carned on a
compound interest basis and on a simple interest basis for quarter k, where k =
1,2,3,4. Find the ratio of D(4) to D(3).
Answer :
D(4) : simple = 0.03.
Compound = (1.03)4 - (1.03)3
D(3) : simple = 0.03.
Compound = (1.03)3 - (1.03)2
17. The two sets of granparents for a newborn baby wish to invest enough money
immediately to pay $10,000 per year for four years toward college costs starting
age 18. Grandparents A agree to fund the first two payments. If the effective rate
of interest is 6% per annual. find the difference between the contributions of
Granparents A and B.
Answer :
A : 10000 [(1.06)-18 + (1.06)-19] = 6808.57
A : 10000 [(1.06)-20 + (1.06)-20] = 6059.60
18. The sum of the present value of 1 paid at the end of n periods and 1 paid at the
end of 2n periods is 1. Find ( 1 + i )2n.
Answer :
PV1 + PV2 = 1
(1+i)-n + (1+i)-2n = 1
1 1
>> −n + =1
( 1+i ) ( 1+i )−2n
>> (1+i)2n - (1+i)n -1 = 0
−b ± √b 2−4 ac 1± √ 1+ 4 1± √ 5
(1+i)n = = =
2a 2 2
Because value of (1+i) must ≤1 , so that
1+ √5
(1+i)n =
2
Finally,
1+ √5 2 3+ √ 5
(1+i)2n = ( ) = .
2 2
19. It is known that an investment of $500 will increase to $4000 at the end of 30
years. Find the sum of the present values of three payments of $10,000 each
which will occur at the end of 20,40,an 60 years.
Answer :
4000 = 500(1+i)30
(1+i)30 = 8
22. the amount of interest earned on A for one year is $336, while the equivalent
amount of discount is $300. Find A.
Answer :
336
Amount of interest : iA = 336 → i =
A
300
Amount of discount : dA = 300 → d=
A
d 336 300 / A
i= and =
1−d A 1−300/ A
So that
336 (A – 300) = 300A
36A = 100,800
A = $2800
23. Find the present value of $5000 to be paid at the end of 25 months at a rate of
discount of 8% convertible quarterly :
a) Assuming compound discount throughout.
Answer :
25
Dik : t = 25 months. Because it is convertible quartely, so t = .
3
0.08
i = 0.08 . Because it is convertible quartely, so i = = 0.02.
4
the exact answer is
5000v25/3 = 5000(1 – d)t = 5000(1 – 0.02)25/3 = $4225.27.
b) Assuming simple discount during the final fractional period.
Answer :
1
5000v8 (1- d) = 5000 (1 – 0.02) 8[1- ¿)(0.02)] = $4225.46.
3
d3 (i−d) 2
24. Show that =
(1−d) 2 1−v
Answer :
LHS = RHS
d3 i3 v 3
LHS: = 2 = i3v = i2d.. and
(1−d) 2 v
( i−d )2 ( id )2 2
RHS: = = i d.
1−v d
25. If i and d are equivalent rates of simple interest and simple discount over t
periods, show that.
i – d = idt.
Answer :
Simple interest : a(t) = 1 + it
Simple discount : a-1(t) = 1 – dt
1
1 + it =
1 – dt
1 – dt + it - idt2 = 1
it – dt = idt2
i – d = idt