SOA Exam FM Sample Question 154
Study guide: Exam FM-2
A bond has a modified duration of 8 and a price of 112,955 calculated using an annual effective interest rate of 6.4%.
E_{MAC} is the estimated price of this bond at an interest rate of 7.0% using the first-order Macaulay approximation.
E_{MOD} is the estimated price of this bond at an interest rate of 7.0% using the first-order modified approximation.
Calculate E_{MAC} - E_{MOD}.
- A) 91
- B) 102
- C) 116
- D) 127
- E) 143
Answer this question and see the worked solution
Concepts tested
- Duration
- Macaulay Duration
- Modified Duration
- 1st-Order Macaulay Approximation
- 1st-Order Linear Approximation
- Bonds
- Present Value