Revision as of 21:07, 19 November 2023 by Admin (Created page with "A steel company issued a ten-year 1,000,000 face amount bond on March 1, 2002 with an annual nominal coupon rate of 8% paid semiannually. On September 2, 2004, Company X paid 1,100,000 for this bond to yield an annual nominal rate of i convertible semiannually. Calculate i. <ul class="mw-excansopts"><li>4.0%</li><li>5.5%</li><li>6.3%</li><li>8.0%</li><li>9.7%</li></ul> {{soacopyright | 2023 }}")
ABy Admin
Nov 19'23
Exercise
A steel company issued a ten-year 1,000,000 face amount bond on March 1, 2002 with an annual nominal coupon rate of 8% paid semiannually. On September 2, 2004, Company X paid 1,100,000 for this bond to yield an annual nominal rate of i convertible semiannually.
Calculate i.
- 4.0%
- 5.5%
- 6.3%
- 8.0%
- 9.7%
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
Nov 19'23
Solution: C
[[math]]
\begin{aligned} & M V_5=1,100,000=1,000,000 v^{15}+40,000 a_{\overline{15}| i^{(2)} / 2} \\ & \frac{i^{(2)}}{2}=.03153 \\ & i^{(2)}=0.06306\end{aligned}
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.