Actuarial Outpost Mortgage Financing Problem; Textbook Typo?
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#1
11-11-2018, 11:03 AM
 JohnTravolski Member Non-Actuary Join Date: Aug 2016 Posts: 48
Mortgage Financing Problem; Textbook Typo?

I found this example problem in Eric V. Slud's "Actuarial Mathematics and Life-Table Statistics" book, but I'm having a hard time following it. I'm not sure if there's a typo, or if they just calculated the answer incorrectly, or what, but I'll share it with you here:

When I calculate the value in red, I get \$52429.39 instead, which is a pretty noticeable difference.

Did they mean annuity due instead of immediate (a dot dot instead of just a)? I tried that, but I still get a different answer. Were they using a different interest rate? I don't understand. What's the correct answer here, and how do you get it?

If this helps, I also get different answers for the following two calculations:

I don't understand how he's calculating the annuity value. It doesn't seem to follow from the formula.

Last edited by JohnTravolski; 11-11-2018 at 11:35 AM..
#2
11-11-2018, 11:44 AM
 Gandalf Site Supporter Site Supporter SOA Join Date: Nov 2001 Location: Middle Earth Posts: 31,118

51904.69 seems ok. Annuity immediate for 96 periods at 0.66667% per period
#3
11-11-2018, 12:05 PM
 JohnTravolski Member Non-Actuary Join Date: Aug 2016 Posts: 48

Quote:
 Originally Posted by Gandalf 51904.69 seems ok. Annuity immediate for 96 periods at 0.66667% per period
I have attached my calculations. Am I doing this incorrectly? I just don't understand why my answer is 500 dollars off.

Last edited by JohnTravolski; 11-11-2018 at 12:11 PM..
#4
11-11-2018, 12:23 PM
 Breadmaker Member SOA Join Date: May 2009 Studying for CPD - and nuttin' else! College: Swigmore U Favorite beer: Guinness Posts: 4,287

8% is already the nominal monthly rate. All you have to do is 8%/12 = 0.66667%.
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#5
11-11-2018, 12:28 PM
 JohnTravolski Member Non-Actuary Join Date: Aug 2016 Posts: 48

wow, okay, I see it now. Thank you so much.