SOA Exam FM Sample Question 450

Study guide: Exam FM-2

An electric company faces liabilities with present values 24,000 and 1,000, due 7.5 years from now and 20 years from now, respectively.

The company will purchase an n-year zero-coupon bond and a 2n-year zero-coupon bond.

Determine which of the following expressions describes the set of all values of n for which the company can achieve Redington immunization.

• A) 4 \le n \le 8
• B) 5 < n < 7
• C) n = 5 or n = 7
• D) 0 < n < 5 or n > 7
• E) 4 \le n < 5 or 7 < n \le 8

Answer this question and see the worked solution

Concepts tested

• Immunization
• Redington Immunization
• Duration
• Convexity

More questions from this set

• SOA Exam FM Sample Question 449
• SOA Exam FM Sample Question 451