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Problem 4 (ALM risk). Consider a financial asset with the fol- lowing cash flow stream tk 1 2 50 99 100 CF(tk) x x x
Problem 4 (ALM risk). Consider a financial asset with the fol- lowing cash flow stream tk 1 2 50 99 100 CF(tk) x x x x 1000 + x Here, x is a real number to be determined. Further assume that our financial asset has Macaulay duration D = 10 and that the current zero-coupon interest rates are R(1) = 0.5%, R(2) = 1%, R(50) = 4%, and R(99) = R(100) = 5%. Compute x.
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