Revision as of 21:30, 19 November 2023 by Admin (Created page with "A 15-year bond with a face amount of 5000, a redemption value of C, and an annual coupon rate of 7% paid quarterly is purchased at a price that yields an annual nominal rate of 5.6% convertible quarterly. The amount for amortization of premium in the third coupon payment is 6.88. Calculate C. <ul class="mw-excansopts"><li>5150</li><li>5165</li><li>5190</li><li>5235</li><li>5</li></ul> {{soacopyright | 2023 }}")
ABy Admin
Nov 19'23
Exercise
A 15-year bond with a face amount of 5000, a redemption value of C, and an annual coupon rate of 7% paid quarterly is purchased at a price that yields an annual nominal rate of 5.6% convertible quarterly.
The amount for amortization of premium in the third coupon payment is 6.88.
Calculate C.
- 5150
- 5165
- 5190
- 5235
- 5
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
Nov 19'23
Solution: A
Using the basic formula:
[[math]]
\begin{aligned}
& B V_2-B V_3=6.88 \\
& \left(87.5 a_{\overline{58} \mid}+C v^{58}\right)-\left(87.5 a_{\overline{57} \mid}+C v^{57}\right)=6.88 \\
& 39.0667-0.00625 C=6.88 \\
& C=5150
\end{aligned}
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.