Revision as of 01:20, 20 November 2023 by Admin (Created page with "The table below defines available zero-coupon bonds and their prices: {| class="table table-bordered" ! Years to Maturity !! Bond Price Per Bond !! Redemption Value Per Bond |- | 1 || 961.54 || 1,000 |- | 2 || 966.14 || 1,050 |- | 3 || 878.41 || 1,000 |} A company chooses to purchase 15 one-year zero-coupon bonds; 20 two-year zero- coupon bonds; and 30 three-year zero-coupon bonds. Calculate the Macaulay duration of this portfolio <ul class="mw-excansopts"><li>1.97<...")
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AAdmin
Nov 20'23

Exercise

The table below defines available zero-coupon bonds and their prices:

Years to Maturity Bond Price Per Bond Redemption Value Per Bond
1 961.54 1,000
2 966.14 1,050
3 878.41 1,000

A company chooses to purchase 15 one-year zero-coupon bonds; 20 two-year zero- coupon bonds; and 30 three-year zero-coupon bonds.

Calculate the Macaulay duration of this portfolio

  • 1.97
  • 2.11
  • 2.16
  • 2.20
  • 2.23

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

AAdmin
Nov 20'23

Solution: D

(15(961.54)(1) +20(966.14)(2)+ 30(878.41)(3))/(15(961.54) +20(966.14) + 30(878.41)) = 2.198495.

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

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