SOA Exam FM Sample Question 445
Study guide: Exam FM-2
An investor owns two bonds, Bond 1 and Bond 2. At today's annual effective interest rate, the bonds have the following characteristics:
| Bond 1 | Bond 2 | |
|---|---|---|
| Present Value | 20,400 | 20,400 |
| Modified Duration (in years) | 11.735 | 13.101 |
If the annual effective interest rate decreases by 50 basis points today, the first-order Macaulay approximations of the present value for Bond 1 and Bond 2 are 21,635.83 and X, respectively.
Calculate X.
- A) 21,503.55
- B) 21,596.97
- C) 21,736.30
- D) 21,779.69
- E) 21,784.47
Answer this question and see the worked solution