Originally Posted by

**cknapp1**
Hi, I'm going through the Actex manual and I am having problems with two things:

1) An exercise states "At a nominal interest rate of i convertible semi-annually, an investment of 1000 immediately and 1500 at the end of the fist year will accumulate to 2600 at the end of the second year. Calculate i." Is this misprinted or am i missing something? "an investment of 1000 immediately and 1500 at the end...." is what I'm asking about...

and

2) The actex book says, "There is an important distinction here. Under continuous interest at 6% at time 2, a(2)=1.06^2, which is the same amount you would have under annual interest. However, there is a difference at fractional times like t=1.5. For continuous interest, you would have 1.06^1.5 at t=1.5, but for annual interest you still only have 1.06 at t=1.5, because interest is not compounded until t=2. But I try to work exercise 1 which states:

"Bruce deposits 100 into a bank account. His account is credited interest at a nominal rate of interest of 4% convertible semiannually.

At the same time, Peter deposits 100 into a separate account. Peter's account is credited interest at a force of interest of d

After 7.25 years, the alue of each account is the same. Calculate d."

So for Bruces account doesnt my first paragraph imply that yr=7 is as far as interest is accumulated? The solution manual uses j=(1.02)^.5-1 as the quarterly rate and then compounds Bruce's interest up through 7.25 periods..

I've been stuck on these all day, so if anyone could help I'd be real appreciative (Theres only a few weeks left before the exam!)

Thanks,

Chris K.