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henricksteele
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Homework Statement
You wish to invest $10,000 over 10 years. Available to you are 5 different funds. At any time you may transfer money from one fund to another without penalty or transaction fee. To optimize the money you receive at the end of 10 years you realize that you want all of your money in the fund with highest force of interest at any give time. Remember the force of interest δ(t) = a'(t)/a(t)
Conversely, given δ(x), you can find that investing $1 from t1 to t2 equals
exp(t1∫t2δ(x)dx)
Fortunately, for each of the five funds you know either its accumulation or
force of interest function. These are given as
1) a1(t) = (1+ln(1+t)/35)t
2) a2(t) = (1-.05t)-1
3) a3(t) = (1.08)t
4) δ4(t) = 1/(√(2π*15)*exp(-(x-5)2/30)
5) a5(t) = 1+.25ln(1+t)
Homework Equations
There are three parts to this problem
(a) List the time intervals where you should invest your money in each fund
to maximize earnings.
(b) Calculate the amount of money you have at the end of 10 years using the
optimal strategy.
(c) Calculate the amount of money you have at the end of 10 years if you
invested your money exclusively in one fund. Do this for all five funds.
P.S.: You probably need to draw a graph of the 5 force of interests with time t and always pick up the highest force of interest to invest your money.
The Attempt at a Solution
This isn't exactly a homework problem, I'm mainly trying to learn how to use financial calculators to solve investing problems similar to this one so if someone knows how to use Excel or something similar, please describe the process or recommend a good site to learn.
Thanks.