3. Financial Mathematics
Interest Theory — Quiz
Test your understanding of interest theory with 5 practice questions.
Practice Questions
Question 1
An investment of $1,000$ is made. It earns simple interest at an annual rate of $5\%$ for the first $2$ years and then compound interest at an annual effective rate of $6\%$ for the next $3$ years. What is the accumulated value at the end of $5$ years?
Question 2
A loan of $5,000$ is to be repaid with a single payment at the end of $6$ years. If the annual effective interest rate is $8\%$, what is the amount of the payment?
Question 3
An investment fund offers an annual effective interest rate of $7\%$. If an investor wants to accumulate $15,000$ in $10$ years, how much must they invest today?
Question 4
If the force of interest is given by $\delta(t) = 0.03t$, what is the accumulation function $a(t)$?
Question 5
A nominal interest rate of $10\%$ compounded monthly is equivalent to what annual effective interest rate?