SOA Exam FM Sample Question 314
Study guide: Exam FM-2
A student takes out a loan for 30,000. The annual nominal interest rate is 9%, convertible semiannually.
The student pays off the loan in five years with monthly payments beginning one month from today. The first payment is 500, and each subsequent payment is X more than the previous payment.
Determine which of the following is an equation of value that can be used to solve for X.
- A)
30{,}000 = \displaystyle\sum_{n=0}^{60}\frac{500+nX}{(1.015)^{n/2}} - B)
30{,}000 = \displaystyle\sum_{n=0}^{60}\frac{500+nX}{(1.045)^{n/6}} - C)
30{,}000 = \displaystyle\sum_{n=1}^{60}\frac{500+nX}{(1.045)^{n/6}} - D)
30{,}000 = \displaystyle\sum_{n=1}^{60}\frac{500+(n-1)X}{(1.015)^{n/2}} - E)
30{,}000 = \displaystyle\sum_{n=1}^{60}\frac{500+(n-1)X}{(1.045)^{n/6}}
Answer this question and see the worked solution