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Nov 20'23
Exercise
Cash flows are 40,000 at time 2 (in years), 25,000 at time 3, and 100,000 at time 4. The annual effective yield rate is 7.0%.
Calculate the Macaulay duration.
- 2.2
- 2.3
- 3.1
- 3.3
- 3.4
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 20'23
Solution: D
[[math]]
D=\frac{2(40,000) v^{2}+3(25,000) v^{3}+4(100,000) v^{4}}{40,000 v^{2}+25,000 v^{3}+100,000 v^{4}}=3.314.
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.