SOA Exam FM Sample Question 365
Study guide: Exam FM-2
A loan of 100 is to have all principal and accrued interest paid at the end of five years. Interest accrues at an annual effective rate of 5% for the first two years and at a force of interest at time t in years (t > 2) of \delta_t = \dfrac{1}{1+t}.
Calculate the equivalent annual effective rate of discount for the five-year period.
- A) 10.9%
- B) 13.0%
- C) 14.6%
- D) 15.4%
- E) 17.1%
Answer this question and see the worked solution