Exercise
ABy Admin
Nov 19'23
Answer
Solution: D
Let C be the amount of the semiannual coupon for bond B.
[[math]]
\begin{array}{l}{{{ X}=40a_{\overline{100}|0.03}+1000(1.03)^{-10}=1085.30}}\\ {{{ X}=1085.30=C a_{\bar{1}00.035}+1000(1.035)^{-10}=8.3166C+708.9188}}\\ {{{ C}=(1085.30-708.9188)/8.3166=45.2566}}\\ {{{ Y}=\frac{45.25660 \times 2}{1000}=.0905=9.059 \%}}\end{array}
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.