Actuarial Outpost Krzysio's Weekly Practice Problems for FM/2
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 Financial Mathematics Old FM Forum

#101
06-15-2007, 12:29 AM
 krzysio Member SOA AAA Join Date: Mar 2005 Location: Bloomington, Illinois Favorite beer: Tyskie Posts: 1,321
Exercise for June 16, 2007

It is posted at
http://www.math.ilstu.edu/krzysio/KO-FM-Exercise109.pdf
Yours sincerely,
Krzys' Ostaszewski
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#102
06-22-2007, 10:34 PM
 krzysio Member SOA AAA Join Date: Mar 2005 Location: Bloomington, Illinois Favorite beer: Tyskie Posts: 1,321
Exercise for June 23, 2007

It is posted at
http://www.math.ilstu.edu/krzysio/KO-FM-Exercise110.pdf
Yours sincerely,
Krzys' Ostaszewski
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#103
06-28-2007, 06:17 PM
 arlbcd5612 Join Date: May 2007 Posts: 26
perpetuity DUE

Quote:
 Originally Posted by krzysio It is posted at: http://www.math.ilstu.edu/krzysio/KO-FM-Exercise57.pdf Yours, Krzys' Ostaszewski
Because it is perpetuity DUE, the Macaulay duration of asset should be 1/d, then the result shoud be 13.5-14.5=-1. right?
#104
06-28-2007, 09:35 PM
 krzysio Member SOA AAA Join Date: Mar 2005 Location: Bloomington, Illinois Favorite beer: Tyskie Posts: 1,321

Quote:
 Originally Posted by arlbcd5612 Because it is perpetuity DUE, the Macaulay duration of asset should be 1/d, then the result shoud be 13.5-14.5=-1. right?
Of course not. The question asks for Macaulay duration of perpetuity due, not its price.

Yours,
Krzys'
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#105
06-30-2007, 02:07 AM
 krzysio Member SOA AAA Join Date: Mar 2005 Location: Bloomington, Illinois Favorite beer: Tyskie Posts: 1,321
Exercise for June 30, 2007

It is posted at
http://www.math.ilstu.edu/krzysio/KO-FM-Exercise111.pdf
Yours sincerely,
Krzys' Ostaszewski
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#106
07-02-2007, 06:20 PM
 arlbcd5612 Join Date: May 2007 Posts: 26
thanks

Quote:
 Originally Posted by krzysio Of course not. The question asks for Macaulay duration of perpetuity due, not its price. Yours, Krzys'
Thanks Prof. Krzysios. I understand now, Macaulay duration of perpetuity due is [(1+i)/i^2]/(1/d)=1/i
#107
07-02-2007, 06:28 PM
 arlbcd5612 Join Date: May 2007 Posts: 26
another question

Quote:
 Originally Posted by krzysio It is posted at: http://www.math.ilstu.edu/krzysio/KO-FM-Exercise99.pdf Yours, Krzys'
Prof. Krzysios, why the modified duration is 6.079058246/1.06^2? I think it should be 6.079058246/1.06. Thanks.
#108
07-02-2007, 09:16 PM
 krzysio Member SOA AAA Join Date: Mar 2005 Location: Bloomington, Illinois Favorite beer: Tyskie Posts: 1,321

Quote:
 Originally Posted by arlbcd5612 Prof. Krzysios, why the modified duration is 6.079058246/1.06^2? I think it should be 6.079058246/1.06. Thanks.
You go from Macaulay duration to duration by dividing by 1 + i, where i is the effective annual interest rate. In this case, 6% is the semi-annual rate.

Yours,
Krzys'
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#109
07-02-2007, 09:19 PM
 krzysio Member SOA AAA Join Date: Mar 2005 Location: Bloomington, Illinois Favorite beer: Tyskie Posts: 1,321

Quote:
 Originally Posted by arlbcd5612 Thanks Prof. Krzysios. I understand now, Macaulay duration of perpetuity due is [(1+i)/i^2]/(1/d)=1/i
Please do not call me "Krzysios". It's not very hard to see what my name is, it is in every message I post.

You really should simply know that the Macaulay duration of perpetuity due is 1/i. That's covered in my manual, and if you are using a source that does not clearly tell you that, think about using a source that does.

Yours,
Krzys'
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#110
07-02-2007, 10:22 PM
 arlbcd5612 Join Date: May 2007 Posts: 26
Thanks

Quote:
 Originally Posted by krzysio Please do not call me "Krzysios". It's not very hard to see what my name is, it is in every message I post. You really should simply know that the Macaulay duration of perpetuity due is 1/i. That's covered in my manual, and if you are using a source that does not clearly tell you that, think about using a source that does. Yours, Krzys'
Sorry.

Thank you very much, Prof.Ostaszewski.