A Canadian Pension Fund Manager Seeks to Measure the Sensitivity

Multiple Choice

a Canadian pension fund manager seeks to measure the sensitivity of her pension lia- bilities to market interest rate changes. The manager determines the present value of the Liabilities under three interest rate scenarios: a base rate of 7%, a 100 basis point increase In rates up to 8%, and a 100 basis point drop in rates down to 6%. The results of the Manager's analysis are presented below: $\begin{array} { l c } \hline\text { Interest Rate Assumption } & \text { Present Value of Liabilities } \\\hline 6 \% & \text { CAD510.1 million } \\7 \% & \text { CAD455.4 million } \\8 \% & \text { CAD373.6 million } \\\hline\end{array}$ The effective duration of the pension fund's liabilities is closest to:

A) 1.49.
B) 14.99.
C) 29.97.