Question

You are given the accumulation function: a(t) = 2t²+3t+1. Determine the effective rate of interest in year 8. ig.

Hint: lₜ = a(t)-(t-1) / a(t-1)
a. <23%
b. ≥23% but 25%
c. ≥25% but<27%
d. ≥27% but <29%
e. ≥ 29%

Answer 1

To determine the effective rate of interest in year 8, calculate the difference in the accumulation function between years 8 and 7, then divide it by the accumulation in year 7.

Step-by-step explanation:

To determine the effective rate of interest in year 8, we need to calculate the difference in the accumulation function between year 8 and year 7, and then divide it by the accumulation in year 7.

Using the given accumulation function a(t) = 2t²+3t+1, we can substitute t = 8 and t = 7 to find the accumulation in year 8 and year 7, respectively.

Then, we can plug these values into the formula for effective rate of interest: lₜ = [a(t) - a(t-1)] / a(t-1).

Calculating this expression will give us the effective rate of interest in year 8.