SOA Exam FM Sample Question 150
Study guide: Exam FM-2
A company must pay liabilities of 1000 at the end of year 1 and X at the end of year 2. The only investments available are:
- i) One-year zero-coupon bonds with an annual effective yield of 5%
- ii) Two-year bonds with a par value of 1000 and 10% annual coupons, with an annual effective yield of 6%
The company constructed a portfolio that creates an exact cash flow matching strategy for these liabilities. The total purchase price of this portfolio is 1783.76.
Calculate the amount invested in the one-year zero-coupon bonds.
- A) 784
- B) 831
- C) 871
- D) 915
- E) 935
Answer this question and see the worked solution