> -----Original Message-----
> From: Lupica, Paul=20
> Sent: Tuesday, October 13, 1998 1:37 PM
> To: studygroup4a@lists.casact.org
> Subject: FW: Spring 96 Question #2
>=20
> I used basic principles of interest to solve this problem. I'm sure =
that
> you can use the decreasing annuity formula, but with different =
interest
> rates, I found it much simpler to use basic principles.
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> We want to accumulate $10,000 in 10 payments, starting at $1000 and
> decreasing by $100 at each payment. The following is not a formula. =
It
> is a sequence of calculator operations.
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> The accumulated amount immediately before the 10th payment is: =20
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> =
1000*1.07+900*1.07+800*1.07+700*1.07+600*1.08+500*1.08+400*1.08+300*1.08=
+2
> 00*1.08=3D8623.94
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> The last "regular" payment of 100 is added to get 8723.94. =20
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> Thus, the additional amount needed to accompany the $100 is $10,000 -
> $8723.94 =3D $1176.06.
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> So the final total payment is $1276.06.
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> -----Original Message-----
> From: marc.rothschild@zurich.com [SMTP:marc.rothschild@zurich.com]
> Sent: Tuesday, October 13, 1998 8:55 AM
> To: studygroup4a@lists.casact.org
> Subject: Spring 96 Question #2
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> Could anyone please povide me with a solution to Question =AA1 on the =
Spring
> 96 Exam?
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> The question reads as follows:
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> Ellen borrows $10,000 for 10 years at a 9% effective annual rate. =
She
> pays
> interest yearly and will repay the principal by paying 10 annual =
payments
> into a sinking fund. The first interest and sinking fund payment =
will be
> made at the end of the first year.
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> Ellen's sinking fund payments will start at $1,000 and will decrease =
by
> $100 each year. The 10th payment will include an additional amount. =
The
> sinking fund will earn interest at a 7% effective rate for the four =
years
> following the first payment and will earn interest at an 8% effective
> annual rate for the last 5 years.
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> Determine the total amount of Ellen's 10th sinking fund payment.
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> Marc
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