A19 Force of Interest Pt1

Question 1

What is the force of interest intuitively?

Answer 1

A measure of interest that measure interest over infinitesimally small intervals of time. It measures at exact time t and δ_t expresses this measurement as a rate per measure period (yrs unless stated)

Question 2

What is δ_t in terms of A(t) and a(t)?

Answer 2

δ_t = A’(t)/A(t) = a’(t)/a(t)

Question 3

how do you find the accumulation function using force of interest?

Answer 3

——— n
a(n) =e(∫ δ_t dt)
0

Question 4

how do you accumlate from t_1 to t_2 using the force of interest?

Answer 4

———–t_2
a(n) =e(∫ δ_t dt)
– t_1

Question 5

how do you discount and find the discount function?

Answer 5

same thing as accumlation except you set the exponent of e to be negative.