Exercise
Nov 20'23
Answer
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.
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
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
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.