

FlashChat  Actuarial Discussion  Preliminary Exams  CAS/SOA Exams  Cyberchat  Around the World  Suggestions 

Thread Tools  Search this Thread  Display Modes 
#53




Quote:
Yours, Krzys' 
#54




Optionfree bond
Quote:
Yours, Krzys' 
#56




Exercise 5
A few questions regarding the problem below.
http://www.math.ilstu.edu/krzysio/KOFMExercise5.pdf 1) Can someone explain why the first payment is invested a year from now? I thought this was an annuitydue. 2) Can someone explain how we can get 1.06 for the 5th payment? 3) A typo for the 4th payment? It should be 1.0725^2. Thanks! 
#57




Quote:
2) Because you're investing for only 1 year, and by the time you make this investment, there have been 4 25 basis point parallel shifts in the yield curve, making the 1 year spot rate 7.00%  4* .25% = 6.00% 3) Yes, this is a typo. HTH! 
#58




Quote:

#59




Here's a little chart of the spot rates. Notice that you're going to be using the last diagonal:
Code:
nyear spot rate m years from now: n m=0 m=1 m=2 m=3 m=4       1 7.00 6.75 6.50 6.25 6.00 2 8.00 7.75 7.50 7.25 3 8.75 8.50 8.25 4 9.25 9.00 5 9.50 Code:
Time Yrs Rate of to to Acc. Pymt Acc. Acc. Factor     0 5 1.0950 1.574239 1 4 1.0900 1.411582 2 3 1.0825 1.268480 3 2 1.0725 1.150256 4 1 1.0600 1.060000  6.464557 To correct the solution, if I'm right, change "a year from now" to "today", and everything else should be perfect. 
#60




Nice spreadsheet. Thanks!

Thread Tools  Search this Thread 
Display Modes  

