SOA Exam FM Sample Question 198
Study guide: Exam FM-2
A ten-year 1000 par value bond with coupons paid annually at an annual rate of r is callable at par at the end of the 6th, 7th, 8th, or 9th year. The price of the bond is 1023.
If the bond is called in the worst-case scenario for the bond investor, the resulting annual effective yield rate, i, is 96% of r.
Calculate i.
- A) 4.41%
- B) 7.46%
- C) 8.36%
- D) 10.56%
- E) 14.32%
Answer this question and see the worked solution