Actuarial Exam 2/FM Prep: Introduction to Effective Annual Discount Rate

Financial Math for Actuarial Exam 2 (FM), Video #12. Exercise 1.5.5S in "Mathematics of Investment and Credit", Samuel A. Broverman, 6th Edition.

Exercise 1.5.5S: Bruce and Robbie each open up new bank accounts at time 0. Bruce deposits 100 into his bank account, and Robbie deposits 50 into his. Each account earns an effective annual discount rate of d. The amount of interest earned in Bruce’s account during the 11th year is equal to X. The amount of interest earned in Robbie’s account during the 17th year is also equal to X. Calculate X.

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[misshannahjo]

Thank you so much. Currently a math major struggling with financial mathematics 😂

[StairwayToEvan]

this brings back so many memories... of drinking excessively while studying for this

[lilcycy]

Hello. I understand the relationship between i and d, but I don't see the practical use of it. So using discount rate the interest is paid up front? How does this relate to sale price and so on and so forth.