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Chapter 4. Amortization and sinking bonds. Manual for SOA Exam FM/CAS Exam 2.
 

Summary: 1/6
Chapter 4. Amortization and sinking bonds.
Manual for SOA Exam FM/CAS Exam 2.
Chapter 4. Amortization and sinking bonds.
Section 4.3. Reinvestment.
c 2009. Miguel A. Arcones. All rights reserved.
Extract from:
"Arcones' Manual for the SOA Exam FM/CAS Exam 2,
Financial Mathematics. Fall 2009 Edition",
available at http://www.actexmadriver.com/
c 2009. Miguel A. Arcones. All rights reserved. Manual for SOA Exam FM/CAS Exam 2.
2/6
Chapter 4. Amortization and sinking bonds. Section 4.3. Reinvestment.
Suppose that a bank account pays interest in the original deposit,
but not in the obtained interest. Then, it will wise to withdraw the
interest and invest it in another account. In other situations, it
makes sense to reinvest the earned interest in a different
investment. For example, a stock pays dividends and/or capital
gains, which can be invested somewhere else. We obtain a flow of
interest payments which are invested at different rate from the one

  

Source: Arcones, Miguel A. - Department of Mathematical Sciences, State University of New York at Binghamton

 

Collections: Mathematics