SOA 9 blank set

SOA 9 blank set - 35. I z: Cateuiate the duration refs...

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Unformatted text preview: 35. I z: Cateuiate the duration refs common sleek that pays dividends at the end at" each year into penu-etuity. Assume that the dividend is mnslant, and that the effective rate at" interest is “1%. {A} 7' {B} s (e) 11 {D} 19 {E} 2? F's L' “meme P 3?. Calculate the duraticn of a ccmrncn stch-t that pays dividends at the end cf each year inlc perpetuity. Assume thatihe dividend increases by 2% each year and that the effective rate at interest is 5%. is) 2? is} as {C} 44 {D152 (E) SE r 1 1IDBJ'D4 C “.1. I Calculate the lll‘la-zzaula},r duration of an eight-year lflfl par value hand wilh “3% annual w I I 'Iaaupans and an afiacliva rala afintaraal equal to 3%. .i '{AJ 4 (E) 5 .' {C} 15 {u} a '{E} 3 (ix November 29(35 3 Ca uraa FM c 3. A band will pay a CDUpDn el‘ I [ll] aL lhe end area-eh a!" [he nem three years and will pay the face value of l Hill) at the end of the three-year period. The bundle dun-alien . [Macaulay duration] when valued using an annual effective inlereal rate of 213% iaX. Calculate X. (A) 2.6] {a} 2.10 {C} 2.1? (D) 1.39 {E} 3110 C Course FM a. John purehased three bonds to form a portfolio as Foiiows: Bond A has semi-annual coupons at 4%, a duration onI .415 years, and was purchased for 9%. Bond E is a 15-year bond with a duration of |2.35 years and was purehased for “315. Bond (3 has a duration of 16.6? years and was purehased for 11300. Caieulate the duration ol’ the portfolio at the time ol'purehasa. {A} 1.5.62 years {B} “5.6? years {C} 145.?1 years (D) 16.?! years [E]: 145.32 years - r May zero g Course FM C? flx‘. Ev :35. The current price at an annual ccupcn bond is ml]. The derivative cf the price crthe bcnd 1with respect to the yield to maturity is JED. The yield to maturity is an annual efiective rate of 5%. Calculate the duration at the bend. (A) We {a} 149 {c} v.55 [:x-~ {p} rec {E} EDD c firearm ' a 1]. “Which of the following stolements about immunization strategies are true“? ' " 1. To achieve immunization, Ihc eonyE‘J-tiry of the assets must equal Ihe convexity of the liabilities. ll. The full immunization Ieehnique is designed to work for any change in the interest rate. .11]. The theory of immunization was developed to proleet against adverse efi‘ eels ereeled by ehanges in interest rates. [A] None (B) l and ll only it) I and Ill only [I'll] ll and Ill only ‘, I (E) The correct answer is not given by {A}. (B), (C), and (D). m 8' a November 2flfl5 Course FM’ i ll]. I A company musi pay liabilities of IDDD and EDDIE} at the end ofyearsi and 2, ' "reapeclively. The onlyr inveslmenla available lo the company are ihe following ' '1-r - 3' than zero-coupon bonds: ears annual ield Far man Determine lhe coal to the companyr iocla}.r 1o maich its liabililiea exactly. Ls.) 2am - (a) 2259 ‘1' ' I (o) 2533 {o} 21'56 . {E} 30m November 2151135 _ . Course FM 9? r 15. An insurance company accepts an obligation to pa},r 10,000 at the end of each year for 2 years. The insurance company purchases a combination of the Following two bonds at a tolal cost ofJL’ in order to exactly.r match its obligation: [i]: 1—year 4% annual coupon bond with a yield rate ol'5% {ii} 2-year 6% annual coupon bond wilh a yield raic of5%. Calculate X. (A) 13,564 {a} I can I“. ((3) 10,5 04 {o} I 3,594 [E] 10,604 r. Course FM P so. As of12i31ifla_an insurance company has a known obligation to pay $11tititi,tititi on 12i31i2uDT. To fund this liability. the company immediately purchases 4-year 5% annual coupon bonds totaling $322,?D3 of par value. The company anticipates reinvestment interest rates to remain constant at 5% through 12l31!fl?. The matun‘tyr value of the bond equals the par velue. Under the following reinvestment interest rete movement scenarios effe ctive 'll'li'2tifi4, what best describes the insurance company’s profit or {loss} as oi 12l31i2i2ifl? after the liability is paid? {B} {1435?} +14.4ts {Ci {18.9111 +1s,1ss {Di p.313) Interest Rates Interest Increase by 125% Rates Drop by mass r 1 1IDBID4 The following information applies to questions 51 thru 53. Joe must pay: liabilities of 1000 due 0 months from now and another 1000 due one year from now_ There are two available investments: a 0-month bond with face amount of 1.000, a 0% nominal annual coupon rate convertible semiannuallyn and a 0% nominal annual vield rate convertible semiannuallv; and a one-year bond with face amount of 1,000, a 5% nominal annual coupon rale convertible semiannuallv, and a T% nominal annual vielo rate convertible semiannuallv 5‘1. How much of each bond should Joe purchase in order to exactly: {absolutele rnalch the liabilities? Band | {F0 _ '1 {a} some {C} £0501 to} .saaos {E} 00345 lliDBifld Bond |I .QTSEH 34293 .9?551 .E?5Ei1 r The following information applies to questions 51 tth 53. .Joe must pay liabilities of1.EllJlJ clue E months from now and another LUBE} due one year from now. There are two available investments: a 8—month bond with face emount of LUCIE, e 8% nominal ennuel coupon rate convertible semiannuallv. and a 5% nominal annual vield rate oonverlible semiannuellv; and a onervear bond with face amount of LUBE}. e 5% nominal annual coupon rate oonverlibie semiannuallvi and a fit: nominal annual vieid rate convertible semiannuailv 52. What is Joe‘s total oost of ourohesing the bonds required to exactly [absolutele metoh r the Iiabililjes? {A} 1 sea {a} 1 em (a; 1914 {o} 1924 {E} 1934 r 1 1l'ClElflJIll r The following information applies to questions 51 thru 53. Joe must pay liabilities of LUCIE! due 8 months from now and another 1.DDD due one year from now. There are two available investments: a 5-month bond with face amount of 1.13130, a 8% nominal annual coupon rate convertible semiannually, end a 5% nominal annual yield rate convertible semiannually; and a one-year bond with face amount of ‘lflflfl, a 5% nominal annual coupon rate convertible semiannually. and e We nominal annual yield rate convertible semiannuelly 53. What is the annual effective yield rate for investment in the bonds required to exactly r {absolutely} match the liabililias'FI is} see re) 5.5% to) are to) sea {E} save r 1 ‘lfflBID-‘i ...
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This note was uploaded on 03/02/2012 for the course MATH 172 taught by Professor Kong during the Winter '09 term at UCLA.

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SOA 9 blank set - 35. I z: Cateuiate the duration refs...

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