Exercise
Nov 20'23
Answer
Solution: B
[[math]]
\begin{aligned}
& 9297=P a_{20.05} \\
& P=5000 \\
& \frac{5000}{1.05^2}=4535.12
\end{aligned}
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Prosperity Insurance sells a two-year annuity with equal payments at the end of each year. The price of this annuity is 9297. Prosperity Insurance creates a portfolio made up of a one-year zero- coupon bond and a two-year zero-coupon bond to immunize this annuity. The company uses an annual effective interest rate of 5% to vaue its assets and liabilities.
Calculate the amount invested today in the two-year zero-coupon bond
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Solution: B
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.