Revision as of 19:23, 19 November 2023 by Admin (Created page with "A 1000 par value 20-year bond sells for P and yields a nominal interest rate of 10% convertible semiannually. The bond has 9% coupons payable semiannually and a redemption value of 1200. Calculate P. <ul class="mw-excansopts"><li>914</li><li>943</li><li>1013</li><li>1034</li><li>1097</li></ul> {{soacopyright | 2023 }}")
Nov 19'23
Exercise
A 1000 par value 20-year bond sells for P and yields a nominal interest rate of 10% convertible semiannually. The bond has 9% coupons payable semiannually and a redemption value of 1200.
Calculate P.
- 914
- 943
- 1013
- 1034
- 1097
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Nov 19'23
Solution: B
The coupons are 1000(0.09)/2 = 45. The present value of the coupons and redemption value at 5% per semiannual period is
[[math]]P=45a_{\overline{4000}|0.05}+1200(1.05)^{-40}=942.61\,.
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.