Uncle!!! - 4A interest theory question from chapter 3

Carolyn J. McElroy ( (no email) )
Tue, 21 Jul 1998 16:27:04 -0700

Here's a problem from the chapter 3 material. The correct answer is supposed to be 685. If someone solves this problem correctly, please let me know . This is a SOA interest theory problem, and so is probably more challenging than what we'll see in the exam.

Mary invest 1000 at the end of each year for 5 years at an annual effective rate of 9% and reinvests the interest at an annual effective rate of 9%. At the end of 5 years, her investment has value of X.

John invests 1000 at the beginning of each year for 5 years at an annual effective rate of 10% and reinvests the interest at an annual effective rate of 8%. At the end of 5 years, his investment has a value of Y.

Calculate Y - X.

a) 99 b) 147 c) 327 d) 570 e) 685