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Text Box: A Special Shortcut for Some Force of Interest Accumulation Problems

Sometimes a certain type of problem shows up so often on actuarial exams that it makes knowing a shortcut for the problem worthwhile.  Such is the case with this week’s tip, which involves computing the accumulation function when the force of interest is given in a certain form

Generally, given the force of interest at time t, , then the accumulation function is

.

By evaluating the integral and using rules for logarithms and exponentials, we can derive the following often tested special case:






Example:  Suppose , .  Billie Joe deposits 5 at time 0 and X at 
time 6.  The accumulated value in her account at time 9 is 30.  Determine X.

Solution:  Notice that 

 

where .  Therefore, by the above formula,

.

So the accumulated value at time 9 of the deposit of 5 at time 0 is 

,

and the accumulated value at time 9 of the deposit of X at time 6 is

.

We get 

.