Revision as of 01:06, 20 November 2023 by Admin (Created page with "Krishna buys an n-year 1000 bond at par. The Macaulay duration is 7.959 years using an annual effective interest rate of 7.2%. Calculate the estimated price of the bond, using the first-order Macaulay approximation, if the interest rate rises to 8.0%. <ul class="mw-excansopts"><li>940.60</li><li>942.54</li><li>944.56</li><li>947.03</li><li>948.47</li></ul> {{soacopyright | 2023 }}")
Nov 20'23
Exercise
Krishna buys an n-year 1000 bond at par. The Macaulay duration is 7.959 years using an annual effective interest rate of 7.2%.
Calculate the estimated price of the bond, using the first-order Macaulay approximation, if the interest rate rises to 8.0%.
- 940.60
- 942.54
- 944.56
- 947.03
- 948.47
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 20'23
Solution: B
[[math]]
P(0.08)\approx1000\bigg(\frac{1.072}{1.08}\bigg)^{7.959}=942.54.
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.