SOA Exam FM Sample Question 459
Study guide: Exam FM-2
A perpetuity pays 10,000 at the beginning of each year. The present value of the payments calculated using an annual effective interest rate of 7% is L.
The annual effective interest rate decreases to 5% immediately after the perpetuity is purchased. Using the first-order modified duration approximation, the estimated present value of the payments is M.
Calculate M - L.
- A) 40,816
- B) 43,673
- C) 43,791
- D) 47,290
- E) 57,143
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