SOA Exam FM Sample Question 59
Study guide: Exam FM-2
You are given the following information about two bonds, Bond A and Bond B:
(i) Each bond is a 10-year bond with semiannual coupons redeemable at its par value of 10,000, and is bought to yield an annual nominal interest rate of i, convertible semiannually.
(ii) Bond A has an annual coupon rate of (i + 0.04), paid semiannually.
(iii) Bond B has an annual coupon rate of (i - 0.04), paid semiannually.
(iv) The price of Bond A is 5,341.12 greater than the price of Bond B.
Calculate i.
- A) 0.042
- B) 0.043
- C) 0.081
- D) 0.084
- E) 0.086
Answer this question and see the worked solution