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.

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.