A company has to pay out injury compensation payments at the end of each of the next 20 years. The compensation payable at the end of the first year amounts to £1.5 million. Thereafter, the compensation payments are expected to increase at a fixed rate of 2.439% per annum compound. Calculate the duration of the company's liabilities at a rate of interest of 5% per annum effective. (no tables, only formulas) correct answer= 9.68 years
A company has to pay out injury compensation payments at the end of each of the next 20 years. The compensation payable at the end of the first year amounts to £1.5 million. Thereafter, the compensation payments are expected to increase at a fixed rate of 2.439% per annum compound. Calculate the duration of the company's liabilities at a rate of interest of 5% per annum effective. (no tables, only formulas) correct answer= 9.68 years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company has to pay out injury compensation payments at the end of each of the next 20 years. The compensation payable at the end of the first year amounts to £1.5 million. Thereafter, the compensation payments are expected to increase at a fixed rate of 2.439% per annum compound.
Calculate the duration of the company's liabilities at a rate of interest of 5% per annum effective.
(no tables, only formulas)
correct answer= 9.68 years
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