SOA Exam FM Sample Question 145
Study guide: Exam FM-2
An investor purchases two bonds. The bonds have the same annual effective yield rate i, with i > 0.
With respect to the annual effective yield rate, their modified durations are a years and b years, with 0 < a < b.
One of these two bonds has a Macaulay duration of c years, with a < c < b.
Determine which of the following is an expression, in years, for the Macaulay duration of the other bond.
- A)
bc/a - B)
ac/b - C)
ab/c - D)
b + c - a - E)
a + c - b
Answer this question and see the worked solution