CAS Exam 9 Spring 2015, Question 8
Study guide: Exam 9
Given the following information about bonds with annual coupon payments:
| Bond | Par Value | Time to Maturity (in years) | Annual Coupon Rate | Bond Price |
|---|---|---|---|---|
| 1 | $100 | 1 | 2% | $97.89 |
| 2 | $100 | 2 | 4% | Not Given |
| 3 | $100 | 3 | 4% | Not Given |
| 4 | $100 | 4 | 0% | $81.34 |
| Forward Rate Agreement | Lending Period Begins | Term | Principal | Annual Effective Interest Rate | Value (to Lender) |
|---|---|---|---|---|---|
| A | in 2 years | 1 year | $1,000,000 | 6.4% | $6,000 |
| B | in 3 years | 1 year | $2,000,000 | 7.5% | $26,000 |
Calculate the price of Bond 3.
Part a (2.75 points)
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