SOA Exam FM Sample Question 387
Study guide: Exam FM-2
An investor purchases a geometrically decreasing perpetuity-due that provides annual payments. The first payment is 1, and each subsequent payment is 1% less than the previous payment.
At the time of purchase, the Macaulay duration of the perpetuity-due is 12.00 years.
Calculate the modified duration of the perpetuity-due, in years, at the time of purchase.
- A) 10.97
- B) 11.11
- C) 11.19
- D) 12.81
- E) 12.88
Answer this question and see the worked solution