Consider a model of random interest rates Ri between year i and i+1. The Ri are i.i.d. random variables such that 1+Ri is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £5000 at time 0. A) Determine the expectation value of Ri B) Determine the expectation value of the amount of money on your account after 10 years. C) Determine the probability that the money accumulated at time i=10 is more than £ 7500.
Consider a model of random interest rates Ri between year i and i+1. The Ri are i.i.d. random variables such that 1+Ri is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £5000 at time 0. A) Determine the expectation value of Ri B) Determine the expectation value of the amount of money on your account after 10 years. C) Determine the probability that the money accumulated at time i=10 is more than £ 7500.
Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter10: Sequences, Series, And Probability
Section10.8: Probability
Problem 32E
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Consider a model of random interest rates Ri between year i and i+1. The Ri are i.i.d. random variables such that 1+Ri is LogNormal(0.03,0.0010) distributed. Suppose you deposit an amount of £5000 at time 0.
A) Determine the expectation value of Ri
B) Determine the expectation value of the amount of money on your account after 10 years.
C) Determine the probability that the money accumulated at time i=10 is more than £ 7500.
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