Compute the price of a 3.8 percent coupon bond with 18 years left to maturity and a market interest rate of 7 percent
1 answer:
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Step-by-step explanation:
From the statement:
M: is total to be memorized
A(t): the amount memorized.
The key issue is translate this statement as equation "rate at which a subject is memorized is assumed to be proportional to the amount that is left to be memorized"
memorizing rate is .
the amount that is left to be memorized can be expressed as the total minus the amount memorized, that is .
So we can write
And that would be the differential equation for A(t).