3 EFFECTIVE INTEREST RATE (EIR) 25 Practice Problems Problem 3.1 Consider the accumulation function a(t) = + + +1. (a) Find the effective interest rate i, (b) Find in (c) Show that is decreasing Problem 3.2 If $100 is deposited into an account, whose accumulation function is alt) = 1 +0.03VT, at time 0, find the effective rate for the first period(between time 0 and time 1) and second period (between time 1 and time 2). Problem 3.3 Assume that A(t) = 100 + 5t. (a) Find is. (b) Find 110 Problem 3.4 Assume that A(t) = 225 - ( - 10), 0 STS 10. Find is. Problem 3.5 An initial deposit of 500 accumulates to 520 at the end of one year and 550 at the end of the second year. Find 1 and 13. Problem 3.6 A fund is earning 5% simple interest (See Problem 1.5). Calculate the effective interest rate in the 6th year