Revision as of 19:19, 19 November 2023 by Admin (Created page with "'''Solution: A''' Let <math>r</math> be the semiannual coupon rate. For the original bond, <math>P=1000 r a_{60.05}+1000 v^6=5075.692 r+746.215</math>. For the modified bond, <math>P-49=1000 r a_{120.05}+1000 v^{12}=8863.252 r+556.837</math>. Subtracting the second equation from the first gives <math>49=-3787.56 r+189.378</math>. The solution is <math>r=0.037</math> and the coupon is 37 . {{soacopyright | 2023 }}")
Exercise
ABy Admin
Nov 19'23
Answer
Solution: A
Let [math]r[/math] be the semiannual coupon rate. For the original bond, [math]P=1000 r a_{60.05}+1000 v^6=5075.692 r+746.215[/math]. For the modified bond, [math]P-49=1000 r a_{120.05}+1000 v^{12}=8863.252 r+556.837[/math]. Subtracting the second equation from the first gives [math]49=-3787.56 r+189.378[/math]. The solution is [math]r=0.037[/math] and the coupon is 37 .
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.