MATH 2FM3 Lecture Notes - Lecture 8: Effective Interest Rate
14 Oct 2016
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Recall : force of interest i= simple rate. =f?dunh*]=hh# . enact ,d=uhty ] *ki =e*lf?stat) that ah , ) exp ( ftp. kdt) , to ta=t , 5 years of an investment of made at (a) to (b) t=2 (a) als ) . Aa ) = ag)[ exp ({ loose ". aoosu ) du ) - i ] = 1000 [ exp (0. 080++20. 0059) i :} - = 1000 [ exp (0. 08 5+0021 52) - d= 588. 04 (b) ah) - abn ) = ah [ exp ( koos +0. 0054 du ) - Example : overnight rate (a) bank a requires an overnight ( l day ) of 000 000 and is quoted at an annual rate of. Bank a to bank b pays (3 0. 12. 3287. 67 (b) same scenario . however it is quoted at a force of interest. Asks ) - at ) : no ) ( exp. 58 du ) - d= looooooolexplsistl l )
