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ABy Admin
Nov 19'23
Exercise
An investor pays 962.92 for a ten-year bond with an annual coupon rate of 8% paid semiannually. The annual nominal yield rate is 10% convertible semiannually.
Calculate the discount of this purchase.
- 117
- 122
- 127
- 132
- 137
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
Nov 19'23
Solution: E
[[math]]
\begin{array}{l}{{P=C+(F r-C i)a_{\overline{n}|}}}\\ {{962.92=C+(0.04C-0.05C)a_{\overline{20} |0.05}}}\\ {{962.92=C+(-0.01C)12.46221}}\\ {{C=1100}}\end{array}
[[/math]]
The discount is 1100 – 962.92 = 137.08
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.