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Unformatted text preview: (5) A 15year 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 8year bond is 5.35 and its convexity is 39.19. Estimate 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 5year zerocoupon bond and 27,919.74 in a 15year zerocoupon 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 problems: 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
 ZHOU
 Math

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