Does the “terminal value” here means the present value of the liability ?
Terminal value is the value we need to satisfy their requirement. Ending value.
derswap07 Wrote: ------------------------------------------------------- > Terminal value is the value we need to satisfy > their requirement. Ending value. So, it shall be the present value of the Ending value ?
AMC, Choo is making a statement about contingent immunization. You know that it has a terminal value and it allows for active management. So by process of elimination, correct answer is A.
derswap07, What I meant was that it shall be the PRESENT VALUE of the terminal value (ending value), not the “FUTURE VALUE” of the terminal value (ending value), do you think so ? The vagueness caused my wrong answer to it.
No. Terminal value is the future value calculated at minimum acceptable rate.
Yes, the Terminal Value is the FUTURE VALUE calculated at minimum acceptable rate. So, the “safety net level” in the question shall equal to the PRESENT VALUE of the terminal value (ending value). On P.36 & 37, the “FUTURE VALUE” of the terminal value (ending value) is $546.72 and the PRESENT VALUEs of the terminal value (ending value) are $500M (I/R = 3%) & $474.9 (I/R = 4.75%) repectively. Am I missing something ?
You are over analyzing. All the q was asking was whether CI has a terminal value or not. That’s it. Answer is yes. it does.
Yes, maybe I am over analyzing. Anyway, TKVM for your kindness in responding to me.
You are welcome buddy