SOA Exam FM Sample Question 197
Study guide: Exam FM-2
Three asset-liability cash flows are given in the following table where a positive amount is an asset cash flow and a negative amount is a liability due at the corresponding time.
t (in years) |
0 | 1 | 2 | 3 |
|---|---|---|---|---|
| X | 102,400 | −192,000 | 0 | 100,000 |
| Y | 158,400 | −342,000 | 100,000 | 100,000 |
| Z | −89,600 | 288,000 | 100,000 | −300,000 |
Determine which set of cash flows is Redington immunized for an annual effective interest rate of i = 25\%.
- A) X only
- B) Y only
- C) Z only
- D) X, Y, and Z
- E) The correct answer is not given by (A), (B), (C) or (D).
Answer this question and see the worked solution
Concepts tested
- Immunization
- Net Present Value
- Portfolio
- Asset-Liability Portfolio
- Duration Matching
- Redington Immunization