Revision as of 21:13, 19 November 2023 by Admin (Created page with "A 20-year bond with 8% annual coupons is purchased at a price of P. The face amount of the bond is F. The price assumes an annual effective yield rate of 4%. The change in book value of the bond during the 8th year is equal to 43.24. Calculate P. <ul class="mw-excansopts"><li>2315</li><li>2470</li><li>2625</li><li>2780</li><li>3085</li></ul> {{soacopyright | 2023 }}")
ABy Admin
Nov 19'23
Exercise
A 20-year bond with 8% annual coupons is purchased at a price of P. The face amount of the bond is F. The price assumes an annual effective yield rate of 4%. The change in book value of the bond during the 8th year is equal to 43.24.
Calculate P.
- 2315
- 2470
- 2625
- 2780
- 3085
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
Nov 19'23
Solution: D
[[math]]\begin{gathered}\text { Adjustment in book value }=(g-i) v_i^{n-t+1} F \\ =(0.08-0.04) v_{0.04}^{13} F=43.24 \\ F=1800 \\ P=1800(0.08) a_{\overline{20} \mid 0.04}+1800 v_4^{20} \\ =144 a_{\overline{20}|0.04}+1800 v_4^{20}=2778.50\end{gathered}[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.