sol5 - ACTSC 445: Asset-Liability Management Department of...

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Unformatted text preview: ACTSC 445: Asset-Liability Management Department of Statistics and Actuarial Science, University of Waterloo Solutions for Unit 5 Exercises 1. (i) We have that A * = 200(1 . 06)- 2 + 500(1 . 07)- 4 + 300(1 . 075)- 5 = 768 . 41 , and the ytm is obtained by solving A * = 200(1 + y )- 2 + 500(1 + y )- 4 + 300(1 + y )- 5 . Using GoalSeek, we find y = 7 . 0588%. (ii) We have that D m = 1 A * (2 × 200 × (1 + y )- 3 + 4 × 500 × (1 + y )- 5 + 5 × 300 × (1 + y )- 6 ) = 3 . 5713 D = D m × (1 + y ) = 3 . 8234 C = 1 A * (2 × 3 × 200 × (1 + y )- 4 + 4 × 5 × 500 × (1 + y )- 6 + 5 × 6 × 300 × (1 + y )- 7 ) = 17 . 0978 . (iii) (1) (a) The approximate % price change is- D m × . 005 =- 1 . 786%; (b) The approximate % price change is- D m × . 005 + C × . 005 2 / 2 =- 1 . 764%; The true % price change is (754 . 8558- 768 . 4145) / 768 . 4145 =- 1 . 765%. (2) The approximate % price change is- D m ×- . 0075 = 2 . 6785%; (b) The approximate % price change is- D m ×- . 0075 + C × (- . 0075)...
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This note was uploaded on 10/24/2010 for the course ACTSC 445 taught by Professor Christianelemieux during the Fall '09 term at Waterloo.

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sol5 - ACTSC 445: Asset-Liability Management Department of...

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