1.

An accumulation function a(t) may have discontinuities

TRUE. Since there are situations which interest rates accumulate continuously between interest rates
period. Thus, in this case accumulation function may have discontinuities.

2. An accumulation function a(t) is positive for all values of t.

TRUE. Since a(t) is generally an increasing function by its property. And according the definition of
accumulation function, a(t) gives the the accumulated values of 𝑡 ≥ 0 of the investment of 1. Hence, we
can say that the accumulation function a(t) is positive for all values of t.

3. The effective rate of the interest is the amount of money that one unit invested at the start of a period
will earn during the period where interest is paid at the end of the period.

TRUE. The statement is true according to the defintion of effective rate of interest.

4. Assuming that the accumulation function is linear in t, then the effective rate of discount during the nth
period is constant.

TRUE. The effective rate of discount is constant over successive nth measurement period.

5. Money accumulates better interest under simple interest than under compound interest for long-term
transaction.

FALSE. Money accumulates better interest under compound interest since its accumulation function is
exponential. It means that it allows money to accumulate at a faster rate than of you would in an account
with a simple interest rate for long-term transaction.

6. The discount function [𝑎(𝑡)]−1 is generally decreasing function of time.

TRUE. We know by the property of accumulation function is generally an increasing function. Since
discount function is just an inverse of accumulation function. Hence, The discount function [𝑎(𝑡)]−1 is
generally decreasing function of time.

7. The amount of simple discount is directly proportional to the size of the principal, the discount rate and
the term of investment.

FALSE. The amount of simple discount is INVERSELY proportional to the size of the principal, the discount
rate and the term of investment.

8. An annual compound interest of 12% implies an interest of 1% per month.

TRUE. We know that the 12% per year compounded monthly. Thus, it means that an annual compound
interest of 12% implies an interest of 1% per month

9. 𝑖 (𝑚) > 𝑖 for any positive integer 𝑚 > 1.

FALSE. As the value of m gets bigger 𝑖 (𝑚) yields smaller value than i.

10. The force of interest or discount is a measure of interest at a particular moment of time.

TRUE. The statement is true according to the definition of force of interest or discount.
 𝐷𝐼𝑆𝐶𝑂𝑈𝑁𝑇𝐸𝐷 𝑉𝐴𝐿𝑈𝐸 𝐴𝐶𝐶𝑈𝑀𝑈𝐿𝐴𝑇𝐸𝐷 𝑉𝐴𝐿𝑈𝐸
1 Given: Given:
A = 50000 P = 50000
i = 0.0324 i = 0.0324
1
t=4 t=2
2

𝑃 = (1 + 𝑖)−𝑡 𝐴 = 𝑃(1 + 𝑖)𝑡

𝑃 = 50000(1 + 0.0324)−4 1
𝑃 = 𝑃 44,012.70 𝐴 = 50000(1 + 0.0324)22
𝐴 = 𝑃 54148.94

2 Given: Given:
A = 50000 P = 50000
i = 0.0496 i = 0.0496
3
t=2 t=
4

𝑃 = (1 − 𝑑)𝑡 𝐴 = (1 − 𝑑)−𝑡
𝑃 = 50000(1 − 0.0496)2 3
𝑃 = 𝑃 45163.01 𝐴 = 50000(1 − 0.0496)− 4
𝐴 = 𝑃 51944.57

3 Given: Given:
A = 50000 P = 50000
i =0.044 i = 0.044
120 201
t= t=
365 365

𝑃 = 𝐴 (1 + 𝑖𝑡)−1 𝐴 = (1 + 𝑖𝑡)
120 −1 201
𝑃 = 50000( 1 + 0.044 ( ) 𝐴 = 50000 (1 + 0.044( ))
365 365
𝑃 = 𝑃 49,287. 03 𝐴 = 𝑃 51211.51

4 Given: Given:
A = 50000 P = 50000
i = 0. 0675 i = 0.0324
144 163
t= t=
360 360

𝑃 = (1 + 𝑖𝑡)−1 𝐴 = (1 + 𝑖𝑡)
144 −1 163
𝑃 = 50000 (1 + 0.0675( )) 𝐴 = 50000 (1 + 0.0675( ))
360 360
𝑃 = 𝑃 48,685.49 𝐴 = 𝑃 51528.13

5 Given: Given:
A = 50000 P = 50000
i = 0. 084 i = 0.084
m=12 m = 12
1 1
t=2 t=1
6 12

−𝑚𝑡 𝑚𝑡
𝑖 (𝑚) 𝑖 (𝑚)
𝑃 =𝐴 (1+ ) 𝐴 = 𝑃(1+ )
𝑚 𝑚
1 1
0.084 −12(26) 0.084 (12)(112)
𝑃 = 50000 (1 + ) 𝐴 = 50000 (1 + )
12 12
𝑃 = 𝑃 41,706.50 𝐴 = 𝑃 54,746.09

6 Given: Given:
A = 50000 P = 50000
i = 0. 03 i = 0.03
m=4 m= 4
1 1
t=2 t=1
2 12
𝑚𝑡 −𝑚𝑡
𝑑 (𝑚) 𝑖 (𝑚)
𝑃 = 𝐴 (1− ) 𝐴 = 𝑃(1− )
𝑚 𝑚
1
0.03 4(22) 0.03 −(4)(4)
𝑃 = 50000 (1 − ) 𝐴 = 50000 (1 − )
4 4
𝑃 = 𝑃 46,374.06 𝐴 = 𝑃 56,400.34
7 Given: Given:
A = 50000 P = 50000
d = 0. 033 d = 0.033
148 156
t= t=
360 360
𝐴 = 𝑃(1 − 𝑑𝑡)−1
𝑃 = 𝐴 (1 − 𝑑𝑡) −1
153
148 𝐴 = 50000 (1 − 0.033 ( ))
𝑃 = 50000 (1 − 0.033 ( )) 360
360
𝐴 = 𝑃 50,711.22
𝑃 = 𝑃 49,321.67
8 Given: P = 50000
A = 50000 d = 0.04125
d = 0. 04125 189
t=
236 360
t=
360

𝐴 = 𝑃(1 − 𝑑𝑡)−1
−1
𝑃 = 𝐴 (1 − 𝑑𝑡) 189
236 𝐴 = 50000 (1 − 0.04125 ( ))
𝑃 = 50000 (1 − 0.04125 ( )) 360
360 𝐴 = 𝑃 51,106.78
𝑃 = 𝑃 48,647.92
9 Given: Given:
A = 50000 P = 50000
Force of interest = 0.0425 Force of interest = 0.0425
1 1
t=3 t=3
2 2
𝑃 = 𝐴𝑒 −𝑟𝑡
1
−0.0425(3 ) 𝐴 = 𝑃𝑒 𝑟𝑡
𝑃 = 50000𝑒 2
𝑃 = 𝑃 43,089.23 𝐴 = 50000𝑒 0.0425(2)
𝐴 = 𝑃 54,435.85

10 Given: Given:
A = 50000 p = 50000
2 2
Force of interest = 𝛿𝑡 = Force of interest = 𝛿𝑡 =
1+𝑡 1+𝑡
t=3 t=3

𝑡 𝑡
𝑃 = 𝐴𝑒 − ∫0 𝛿𝑡 𝑑𝑡 𝐴 = 𝑃𝑒 ∫0 𝛿𝑡𝑑𝑡

𝑡 3 𝑡 3
2 2
∫ 𝛿𝑡 𝑑𝑡 = ∫ 𝑑𝑡 ∫ 𝛿𝑡 𝑑𝑡 = ∫ 𝑑𝑡
0 0 1 + 𝑡 0 0 1 + 𝑡
3 3
1 1
= 2∫ 𝑑𝑡 = 2∫ 𝑑𝑡
0 1 + 𝑡 0 1 + 𝑡
3 3
= 2(ln |1 + 𝑡|)| = 2(ln |1 + 𝑡|)|
0 0

Then, Then,

= 2(ln|1 + 3|) − 2(ln|1 + 0|) = 2(ln|1 + 3|) − 2(ln|1 + 0|)

= 2 ln|4| − 2 ln|1| = 2 ln|4| − 2 ln|1|
= 2 ln 4 − 0 = 2 ln 4 − 0
= 4𝑙𝑛2 = 4𝑙𝑛2

Now, Now,
𝑃 = 50000𝑒 −4𝑙𝑛2 𝑃 = 50000𝑒 4𝑙𝑛2
𝑃 = 𝑃 3125.00 𝑃 = 𝑃 800,000