SOA Exam FM Sample Question 307
Study guide: Exam FM-2
A scholarship foundation is committed to make a payment of 20,000 exactly two years from today. It plans to use two zero-coupon bonds to fully immunize the liability based on a flat curve and an annual effective yield rate of 5.5%. One of the bonds will have a one-year maturity and the other will have a three-year maturity.
Calculate the face value of the one-year zero-coupon bond.
- A) 9,479
- B) 9,779
- C) 10,079
- D) 10,379
- E) 10,679
Answer this question and see the worked solution
Concepts tested
- Immunization
- Duration
- Bonds
- Portfolio
- Asset-Liability Portfolio
- Duration Matching
- Full Immunization
- Redington Immunization