Actuarial Outpost Prospective and Retrospective Methods Question
 User Name Remember Me? Password
 Register Blogs Wiki FAQ Calendar Search Today's Posts Mark Forums Read
 FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

 Financial Mathematics Old FM Forum

 Thread Tools Search this Thread Display Modes
#1
03-17-2018, 02:09 PM
 Nagsinde2002 SOA Join Date: May 2017 College: University of Wisconsin - Madison (1st year) Posts: 20
Prospective and Retrospective Methods Question

Hello, I was looking at Example 37.2 from "A Basic Course in the Theory of Interest and Derivatives Markets: A Preparation for the Actuarial Exam FM/2" by Marcel B. Finan and I am confused why they set it up like this:

The problem reads: A loan is being repaid with 16 quarterly payments, where the first 8 payments are each \$200 and the last 8 payments are each \$400. If the nominal rate of interest convertible quarterly is 10%, use both the prospective method and the retrospective method to find the outstanding loan balance immediately after the first six payments are made.

Using the prospective method, it was set up like this:
B(p,6) = 200(v + v^2) + 400(v + v^2 + ....+ v^8)

If the question asks for the loan balance after 6th payment shouldn't it be:
200 * (annuity-immediate of n = 10) and not include the 400.

If someone can clarify this, that would be helpful.

 Thread Tools Search this Thread Search this Thread: Advanced Search Display Modes Threaded Mode

 Posting Rules You may not post new threads You may not post replies You may not post attachments You may not edit your posts BB code is On Smilies are On [IMG] code is On HTML code is Off

All times are GMT -4. The time now is 02:13 PM.

 -- Default Style - Fluid Width ---- Default Style - Fixed Width ---- Old Default Style ---- Easy on the eyes ---- Smooth Darkness ---- Chestnut ---- Apple-ish Style ---- If Apples were blue ---- If Apples were green ---- If Apples were purple ---- Halloween 2007 ---- B&W ---- Halloween ---- AO Christmas Theme ---- Turkey Day Theme ---- AO 2007 beta ---- 4th Of July Contact Us - Actuarial Outpost - Archive - Privacy Statement - Top

Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.14048 seconds with 10 queries