SOA Exam FM Sample Question 29
Study guide: Exam FM-2
You are given the following information with respect to a bond:
(i) par value: 1000
(ii) term to maturity: 3 years
(iii) annual coupon rate: 6% payable annually
You are also given that the one, two, and three year annual spot interest rates are 7%, 8%, and 9% respectively.
The bond is sold at a price equal to its value.
Calculate the annual effective yield rate for the bond i.
- A) 8.1%
- B) 8.3%
- C) 8.5%
- D) 8.7%
- E) 8.9%
Answer this question and see the worked solution