The force of interest δ (t ) is a function of time and at any time, measured in years, is given by the formula: δ = (0.04 + 0.01t) 0<t<4 δ = (0.12 - 0.01t) 4<t<8 δ = 0.06 8<t Calculate the present value at time t = 0 of a payment stream, paid continuously from time t = 9 to t = 12, under which the rate of payment at time t is 50e^0.01t . For this type of question, and others involving present values is there any tips anyone can offer me to avoid running into a messy equation involving integration by parts. I have looked at the solution and it is a simple question when treated as is in the solution, but I want to be able to keep it that simple in the exam. Any tips welcome
Hurrah! At last a decent question on this forum! You use substitution rather than integration by parts - there is another thread on this forum that is quite helpful - where you can "spot" the solution. Click here to go there.
