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extra_problems_9

# extra_problems_9 - Term to Maturity Price 1 9328.36 2...

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1. A fund satis°es Redington±s conditions for immunization at an interest rate of 12%. The Macaulay convexity for the assets is 18 and the Macaulay convexity for the liabilities is 16. If interest rates where to drop to 11% calculate the approximate relative change to the fund±s surplus. 2. Find the Macaulay duration at i = 0% for an annuity which pays \$710 at the end of each year for ten years. 3. A \$100, 2-year zero coupon bond sell for \$90.25. Calculate the bonds Macaulay duration and convexity. 1

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4. You are given the following prices for \$10,000 zero coupon bonds:
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Unformatted text preview: Term to Maturity Price 1 9328.36 2 8685.62 3 8072.14 4 7488.07 a) A loan of \$5000 is to be repaid by two equal payments \$X at times 2 and 4. Use the term structure of interest rates de&ned by the zero coupon bonds to determine X. b) Calculate the one-year deferred two-year forward rate. c) Calculate the two-year deferred one-year forward rate. d) A loan made at time 0 may be repaid by either a single payment of \$3000 at time 3 or a single payment of \$Y at time 4. Calculate Y. 2 4...
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extra_problems_9 - Term to Maturity Price 1 9328.36 2...

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