CT1 Chapter Assignments

Chapter 5
PART A
Q1.A payment of Rs. 10000 is due at time t = 4 and Rs. 14000 is due at time t = 8. Where t is
measured in years and
a. t = 1, 2, 3, 4…
b. t>0

Find a general expression for ρ(t) the payment at time t in both cases.

Q2.A payment stream starts with a payment of Rs. 500 at time 0 and increases by Rs. 50 per year
a. at the end of each year
b. continuously

Find a general expression ρ(t) for the payment at time t also find the payment at time t = 10.

Q3.A payment of Rs. 1000 is made at time 1 and is then increased by Rs. 20 per year, find a
general expression ρ(t) for the payment at time t, also find the payment at time t = 20, and t =
0.

Q4.A payment of Rs700 is made at time 1 and is then decreased by Rs. 10 per year
a. at the end of each year
b. continuously

Find a general expression ρ(t) for the payment at time t also Find the payment at time t = 17.

Q5.A payment of 1500 is due at time t = 5 each payment is increased Rs. 75 at the end of each
year [t is measured in years]. If the payment stream started at time 2, find a general
expression for the payment at time 𝑡 > 3.

1500
0 1 2 3 45

Q6. Ram purchased a weekly premium term plan of ten years in which premium is increased
by Rs. 1 weekly and initial premium is Rs40. Find a general expression for the payment at
time t. [Also show range of t and minimum and maximum premium]

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Q7. Sudhir purchases a term plan of ten years in which premium is decreased by Rs10 weekly
and initial premium is Rs. 100000. Find a general expression for the payment at time t. [Also
show range of t and minimum and maximum premium]

Q8. A road contractor estimates an inaugural toll of Rs.80,000 on day one. From day two
onwards he expects his toll collections to increase by Rs. 1000 per day for the next four years
and then to become constant for the next six years. Find a general expression for ρ(t) for the
toll collection amount at time t, clearly mentioning the time unit used by you.

Q9. A charity estimates to receive donations at the rate of Rs. 2,50,000 per week in the week
immediately following their fund-raiser and then to decline at the rate of Rs.2500 per week. It
plans to organise the next fund raiser in the week, the donations fall to Rs.1,00,000. If it costs
Rs.6,00,000 to organise the fund raiser, calculate the PV of net donations from a single fund
raiser.

PART B
Q10. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

𝛿 (𝑡 ) = 0. 05 0≤𝑡<5
0. 21 − .03𝑡 𝑡≥5
Calculate the accumulated value at time 10 of Rs100 which is payable at time 2 and 500 which is
payable at t = 5.

Q11. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

0.1 + 0.01𝑡 0≤𝑡<8

𝛿 (𝑡 ) = 0.18 8 ≤ 𝑡 < 10
0.28 − 0.01𝑡 10 < 𝑡 ≤ 15
Calculate the present value of Rs500 which is due at time 13 and a continuous payment of 10 t
which is payable continuously between time 4 and 10.

Q12. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

𝛿 (𝑡 ) = 0.09 + 0.02𝑡 0≤𝑡<7

0.23 − 0.01𝑡 7 ≤ 𝑡 ≤ 15
0.07 t>15
Calculate the value at time 4 of Rs750 which is due at time 9 and Rs250 which is due at time 1
and Rs200 which is due at time 16.
PART C

Q13. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

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0 .05 + 0.005𝑡 0≤𝑡<5

𝛿 (𝑡 ) = 0.175 − 0.02𝑡 5≤𝑡<8
0.06 𝑡≥8

a. Calculate the value at time 0 of Rs500 which is due at time 8 and Rs900 which is due at
time 12.
b. Calculate the nominal annual rate of discount p.a. convertible quarterly implied by
transaction in (a).

Q14. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

𝛿 (𝑡 ) = 1 + 1.4𝑡 0<𝑡<8
0.15 𝑡≥8
a. Calculate the present value of 10 year continuously payable annuity which is payable at a
rate RS1000 p.a. initially and increase linearly buy Rs140 p.a.

Q15. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

0.04 0≤𝑡<6
𝛿 (𝑡 ) = 0.08 6 ≤ 𝑡 < 10
0.2 − 0.012𝑡 10 ≤ 𝑡 ≤ 15

a. Calculate the accumulated amount at time t = 15 of a continuous payment stream 500

𝑒 .05𝑡 which is payable between time t = 3 to t = 7 and time t = 8.5 to t = 9.5.

b. Calculate the following, corresponding to the above of interest.

i. Annual effective rate of interest
ii. Annual effective rate of discount
iii. Constant force of interest
iv. Nominal rate of interest p.a. convertible monthly.

Q16. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

0. 12 0≤𝑡<8
𝛿 (𝑡 ) = 0.04 + .01𝑡 8 ≤ 𝑡 < 10
0.14 𝑡 > 10
i. Determine the discount factor, 𝑉(𝑡), that applies at time t for all 𝑡 ≥ 0.
ii. Calculate the present value of an annuity of Rs5000 p.a. which is deferred for 8 years
and payable in arrear for next 7 years.

Q17. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

𝛿 (𝑡 ) = 0.01 + 0.04𝑡 0≤𝑡<5

0.2 𝑡≥5

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0continuously between time 3 to 6 and (5 + 20 t) which is payable continuously between time 4

to 6.

Q18. The force of interest 𝛿 (𝑡) at any time t (measured in years) is given by:-

𝛿 (𝑡 ) = 0.1 + 0.01𝑡 0≤𝑡<5

0.2 − 0.01𝑡 5 ≤ 𝑡 ≤ 10
Calculate the accumulate value at time 10 for the following:-
i. 100 p.a. payable at time 2
ii. 100 p.a. payable continuously in year 2
iii. 100 p.a. payable weekly in year 2
iv. 100 p.a. payable continuously between time 2 to 5.

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