SOA Exam FM Sample Question 338
Study guide: Exam FM-2
A company is required to pay 50{,}000(1.075)^y in y years. The company invests 30,000 in a 28-year zero-coupon bond and 20,000 in a 35-year zero-coupon bond to Redington immunize its position against small changes in interest rates, based on an annual effective interest rate of 7.5%.
Calculate y.
- A) 30.80
- B) 31.32
- C) 31.50
- D) 31.68
- E) 32.20
Answer this question and see the worked solution
Concepts tested
- Immunization
- Duration
- Bonds
- Portfolio
- Asset-Liability Portfolio
- Duration Matching
- Redington Immunization
- Convexity