Revision as of 18:04, 20 November 2023 by Admin (Created page with "Which of the following statements regarding immunization are true? <ul style="list-style-type:upper-roman"> <li>If long-term interest rates are lower than short-term rates, the need for immunization is reduced.</li> <li>Either Macaulay or modified duration can be used to develop an immunization strategy.</li> <li>Both processes of matching the present values of the flows or the flows themselves will produce exact matching.</li> </ul> <ul class="mw-excansopts"><li>I onl...")
Nov 20'23
Exercise
Which of the following statements regarding immunization are true?
- If long-term interest rates are lower than short-term rates, the need for immunization is reduced.
- Either Macaulay or modified duration can be used to develop an immunization strategy.
- Both processes of matching the present values of the flows or the flows themselves will produce exact matching.
- I only
- II only
- III only
- I, II and III
- The correct answer is not given by (A), (B), (C), or (D).
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 20'23
Solution: B
I) False. The yield curve structure is not relevant.
II) True.
III) False. Matching the present values is not sufficient when interest rates change.
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.