A 6 year annuity pays 1000 at the end of each yeara compute, Ask an Expert

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A 6 year annuity pays $1,000 at the end of each year.

a. Compute the price of the annuity at an effective annual interest rate of 2%.

b. Compute the modified duration at an effective annual interest rate of 2%.

c. Compute the (Macaulay) duration at an effective annual interest rate of 2%.

d. Compute the modified convexity at an effective annual interest rate of 2%.

e. Compute the Macaulay convexity at an effective annual interest rate of 2%.

f. Estimate the new price of the annuity if the interest rate changes to 1.9% using the first- order modified approximation.

g. Estimate the new price of the annuity if the interest rate changes to 1.9% using the first- order Macaulay approximation.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92744103

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