ACT245 Sum09 TT1 v05 Privacy Version Code A post test for web

# ACT245 Sum09 TT1 v05 Privacy Version Code A post test for web

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ACT245 Sum09 TT1 v06 Privacy Version Code A post test for web Page 2 of 10 1. It is time t=0 years. You need to first-order immunize (match PV and duration) a payment of \$1,000,000 which you need to make at time t=4 years. Market interest rates are 6% per annum effective for all terms, a flat yield curve. The only bonds available are zero coupon bonds with maturities at t=2 years and at t=7 years and you buy some of each. Calculate how much face value of the 7-year bond you buy. (A) Less than \$580,000 (B) \$580,000 but less than \$610,000 (C) \$610,000 but less than \$640,000 (D) \$640,000 but less than \$670,000 (E) \$670,000 or more (A) Solution: D MAC (L)=4. Work in \$000,000
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## This note was uploaded on 08/13/2011 for the course ACT 245 taught by Professor Sharp during the Summer '07 term at University of Toronto.

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ACT245 Sum09 TT1 v05 Privacy Version Code A post test for web

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