SOA Exam FM Sample Question 156
Study guide: Exam FM-2
Graham is the beneficiary of an annuity due. At an annual effective interest rate of 5%, the present value of payments is 123,000 and the modified duration is D_{MOD}.
Tyler uses the first-order Macaulay approximation to estimate the present value of Graham's annuity due at an annual effective interest rate of 5.4%. Tyler estimates the present value to be 121,212.
Calculate D_{MOD}, the modified duration of Graham's annuity at 5%.
- A) 3.67
- B) 3.75
- C) 3.85
- D) 3.95
- E) 4.04
Answer this question and see the worked solution
Concepts tested
- Duration
- Macaulay Duration
- Modified Duration
- 1st-Order Macaulay Approximation
- Annuity Due
- Present Value