SOA Exam FM Sample Question 72
Study guide: Exam FM-2
An investor purchases a 10-year callable bond with face amount of 1000 for price P. The bond has an annual nominal coupon rate of 10% paid semi-annually.
The bond may be called at par by the issuer on every other coupon payment date, beginning with the second coupon payment date.
The investor earns at least an annual nominal yield of 12% compounded semi-annually regardless of when the bond is redeemed.
Calculate the largest possible value of P.
- A) 885
- B) 892
- C) 926
- D) 965
- E) 982
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