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Unformatted text preview: (5) A 15-year mortgage is repaid with level monthly payments. the yield is 12% compounded monthly. Calculate the Macaulay duration of the mortgage. (6) The modiﬁed duration of an 8-year bond is 5.35 and its convexity is 39.19. Es-timate the percentage change in the price of the bond if its yield increases by 63 basis points. (7) An insurance company has committed to make a payment of 100,000 in 10 years. In order to fund this liability, the company has invested 27,919.74 in a 5-year zero-coupon bond and 27,919.74 in a 15-year zero-coupon bond. The annual eﬀective yield on all assets and liabilities is 6%. Determine whether the company’s position is immunized. Practice problems : Problem 8.3.1, 8.3.3, 8.3.5 (page 382), Chapter 8 review prob-lems: 6 (page 390) 1...
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This note was uploaded on 11/21/2011 for the course MATH ACTSC 231 taught by Professor Zhou during the Spring '10 term at Waterloo.
- Spring '10