Answered: a) Write an expression for 8(t) (aka:…

a) Write an expression for 8(t) (aka: force of interest) such that its accumulation function is the same as a 2% rate of simple interest. b) What is 8(8)?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 6SCQ: What is the total amount of interest from a 5,000 loan after three years with a simple interest rate...

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Question

Write equation in the form: δ(t) = a'(t) / a(t)

a) Write an expression for 8(t) (aka: force of interest) such that its accumulation function is the same as a
2% rate of simple interest.
b) What is 8(8)?

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Step 1: Define δ(t) aka force of interest.

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Step 2: a. Calculate force of interest as an accumulation function at 2% simple interest.

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Step 3: b. What is δ(8).

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