Ratio of the macaulay duration to the macaulay convexity

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Your company has a liability, which calls for a single payment of 1000 due in ten years, and it funds it with a one-year zero-coupon bond with a price of 200, and a twenty-year zero coupon bond with a price of 800. Current continuously compounded interest rate is 4% and the yield curve is flat. Calculate the ratio of the Macaulay duration to the Macaulay convexity of your company’s surplus.

A. 0.0375 B. 0.1755 C. 0.2985 D. 0.7895 E. 1.0395

Reference no: EM131063959

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