SOA Exam FM Sample Question 228
Study guide: Exam FM-2
An insurer has a liability that is expected to result in the following cash outflows.
| End of year | Cash Outflow |
|---|---|
| 1 | 10 |
| 2 | 12 |
| 3 | 15 |
| 4 | 20 |
| 5 | 30 |
The insurer uses an 8% annual effective interest rate to discount future cash flows.
Calculate the Macaulay duration of this liability.
- A) 3.1 years
- B) 3.2 years
- C) 3.4 years
- D) 3.5 years
- E) 3.6 years
Answer this question and see the worked solution