5. You work for an insurance company that has just purchased an asset worth $109.9 million given today's annual effective interest rate is 5%. You are given the modified duration of the asset is 13.062. You obtain two values (X and Y) assuming interest rates rise by 2% (to 7%). • Xis an estimate of the asset's value using the first order Macaulay approximation • Y= $85.686 million is the exact value Which of the following is closest to the error ratio X /Y- 1. A) -5% C) +1% E) +10% B) -1% D) +5%

5. You work for an insurance company that has just purchased an asset worth $109.9 million given today's annual effective interest rate is 5%. You are given the modified duration of the asset is 13.062. You obtain two values (X and Y) assuming interest rates rise by 2% (to 7%). • Xis an estimate of the asset's value using the first order Macaulay approximation • Y= $85.686 million is the exact value Which of the following is closest to the error ratio X /Y- 1. A) -5% C) +1% E) +10% B) -1% D) +5%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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