Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
24 Assume that you are planning to hold your bond investments to their maturities. If spot rate fluctuates Over the next 10 years A It
24 Assume that you are planning to hold your bond investments to their maturities. If spot rate fluctuates Over the next 10 years A It is doubtful that you can meet your liabilities B you will be able to meet your liabilities at their maturity C You will only be able to meet the 6-years liability D You will only be able to meet the 10-years liability A member ofthe investment committee is advocating to allocate $1,000,000 from the $6,000,000 premiums to invest in a stock 25 portfolio, buy 5000 6-years zero copoun bond, and 3000 10-years zero copoun bonds. She argues that this strategy gaurantees meeting future liabilities generated by the $6m premiums and allow targeting higher returns generated from the stock portfolio. Which of the following is true? A The insiurance company needs all the collected insurance premiums($6,000,000) invested in bonds to meet its future liabilities B liabilities C The insurance company are legally not allowed to invest in the stock market D The insurance company can accept the recommendation of the investment committee member and still meet its future liability E Answers B and D are correct
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started