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Summary: 1/24
Chapter 1. Basic Interest Theory.
Manual for SOA Exam FM/CAS Exam 2.
Chapter 1. Basic Interest Theory.
Section 1.5. Nominal rates of interest and discount.
c 2008. Miguel A. Arcones. All rights reserved.
Extract from:
"Arcones' Manual for the SOA Exam FM/CAS Exam 2,
Financial Mathematics. Spring 2009 Edition",
available at http://www.actexmadriver.com/
c 2008. Miguel A. Arcones. All rights reserved. Manual for SOA Exam FM/CAS Exam 2.
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Chapter 1. Basic Interest Theory. Section 1.5. Nominal rates of interest and discount.
Nominal rate of interest
When dealing with compound interest, often we will rates different
from the annual effective interest rate. Suppose that an account
follows compound interest with an annual nominal rate of
interest compounded m times a year of i(m), then
$1 at time zero accrues to $(1 + i(m)
m ) at time 1
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