Cash flows are 40,000 at time 2 (in years), 25,000 at time 3, and 100,000 at time 4. The annual effective yield rate is 7.0%.

Calculate the Macaulay duration.

• 2.2
• 2.3
• 3.1
• 3.3
• 3.4

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

Solution: D

[[math]] D=\frac{2(40,000) v^{2}+3(25,000) v^{3}+4(100,000) v^{4}}{40,000 v^{2}+25,000 v^{3}+100,000 v^{4}}=3.314. [[/math]]

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