Recursion and Financial Modelling

Match up the following terms with their definition

• enables you to find the nth term

• arithmetic sequence

• constant difference between terms

• geometric sequence

• produce successive terms in a sequence

• recursion rule

• constant ratio between terms

• recursive relation

Consider the first 5 terms in the sequence.

98, 97, 96, 95, 94, ...

This can be generated using the recurrence relation:

Consider the following sequence.

24, 36, 54, 81, ...

The terms can be generated using the recurrence relation

For an investment with an interest rate of 3.95% per annum, compounding monthly, the monthly

interest rate is closest to

• 0.03%

• 0.33%

• 0.40%

• 0.47%

Which of the following rules can be used to model this arithmetic sequence?

2, −3, −8, −13, −18…

Which of the following rules can be used to model this geometric sequence?

0.5, 1, 2, 4, 8, …