Module 0 Chapter 1 solutions

Chapter 1 solutions

Solution 1.1

  {1, 2,3, 4,...} . The elements of  that lie in the interval [ 1,5) are 1, 2, 3 and 4.

Solution 1.2

A  B is the set of elements that are in A but not in B. So A  B  {6,8} .

( A  B )  C is the set of elements in A  B or C (or both). So ( A  B )  C  {1,3, 6,8,10} .

Solution 1.3
(i) This is false as 10 is a multiple of 5.
(ii) This is false as this set contains the element −2.

(iii) This is true since x 2  5 x  7  ( x  52 )2  3

4
, and this always takes positive values.

Solution 1.4
None of the statements is true.
X does not imply Y as 13 is odd but is not divisible by 3.
Y does not imply X as 12 is divisible by 3 but is not odd.

Solution 1.5
 (capital sigma) is used to represent a sum.  (capital pi) is used to represent a product.

Solution 1.6
Since the variance is calculated by squaring the x values, the dimension of the variance here
is T 2 , where T is the dimension of time.

Solution 1.7

The other possible formulae are (i) and (iii) which have dimensions T 2 . The second one
can’t be correct because the dimension of the first term is T 2 , while that of the second term is
T, and terms of different dimensions cannot be subtracted.

Solution 1.8

(i) In the calculation of 1 , k is added to . So these two terms must have the same

dimensions (ie £) for 1 to be a meaningful quantity. Since  is dimensionless, 
must have dimensions of £ 1 .

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Chapter 1 solutions Module 0

(ii) From (i) 1 has dimensions of £.

1 1
The dimensions of  2 and 3 are  £2 and  £3 , respectively.
2 3
£ £

3 £3
(iii) has dimensions  £32c . This will be dimensionless if 3  2c  0 ,
 2c £ 2c
ie c  1.5 .

Solution 1.9
40 basis points is 0.40%. So, after the change, the interest rate is 2.4%.

Solution 1.10
The final payment is made 9 half years (or 4.5 years) after the first payment. So the final
payment is made on 1 March 2018.