I just started studying for FM and I'm having a little trouble with a concept and was hoping someone here might be able to help. The question is:
" If d=0.06t+0.01, what is the accumulated value of $1262 in 6 years?" ( where d represents the force of interest)
I understand the solution in the book (finding a(t)=e^(integral from 0 to t of dr) and then accumulating $1262 for 6 years), but I'm not sure why the solution I tried doesn't seem to work. The method I tried was 1262[e^6(0.06(6)+0.01)].
The method you used suggests that the force of interest was a constant 37% for 6 years. In reality, it was 7% at the end of the 1st year, 13% at the end of the 2nd year, 19% at the end of the 3rd year, etc.