Actuarial Outpost Calculating unknown interest rate
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#1
03-07-2005, 01:38 PM
 Epsilon Theta Member SOA Join Date: Oct 2001 Posts: 307
Calculating unknown interest rate

Are students supposed to use linear interpolation to calculate an unknown interest rate when the problem is not simple enough to use the financial calculator? I use the Excel Solver function in "real life". Linear interpolation can be time consuming.
#2
03-07-2005, 01:53 PM
 NewTubaBoy Member CAS Join Date: Jul 2004 Location: Boston Studying for CAS 8 Favorite beer: Blue Moon Posts: 1,391

Can you give an example of an old exam question like that?
#3
03-07-2005, 01:58 PM
 wat? Member SOA AAA Join Date: May 2004 Location: Hi Studying for beer Favorite beer: Fresh Squeezed IPA Posts: 33,037

Quote:
 Originally Posted by Epsilon Theta Are students supposed to use linear interpolation to calculate an unknown interest rate when the problem is not simple enough to use the financial calculator? I use the Excel Solver function in "real life". Linear interpolation can be time consuming.
I suppose, if you really felt like it, and if a problem like that happened to appear on the exam, you could try to memorize the Newton-Rahpson formulas. I doubt they'll appear, though. In the past, the problems were designed so that the most complicated formula you'd need to remember to figure out i is the quadratic formula. Then again, it is the first FM, so...
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#4
03-07-2005, 04:55 PM
 Epsilon Theta Member SOA Join Date: Oct 2001 Posts: 307

Quote:
 Originally Posted by NewTubaBoy Can you give an example of an old exam question like that?
Can't think of one. But after doing problems from Broverman, I thought about it. I'm hoping the SOA won't be so cruel.
#5
03-09-2005, 01:23 PM
 NewTubaBoy Member CAS Join Date: Jul 2004 Location: Boston Studying for CAS 8 Favorite beer: Blue Moon Posts: 1,391

I'm pretty sure you won't have to do anything like that.
#6
03-09-2005, 04:35 PM
 Skowron SOA AAA Join Date: Oct 2003 Location: INLAND EMPIRE Studying for MLC Favorite beer: Sierra Nevada Celebration Ale Posts: 28

From your mouth to god's ears, NewTubaBoy
#7
03-14-2005, 03:40 PM
 nicole Member Join Date: May 2004 Posts: 62
try this

maybe you could try to substitute all 5 choices into the your final function to see which number yields the answer. sometimes this is a better way compared to calculate i directly.

Last edited by nicole; 03-14-2005 at 03:55 PM..