SOA Exam FM Sample Question 381
Study guide: Exam FM-2
You have decided to invest in a newly issued 20-year bond with annual coupons and the following characteristics:
- i) The price at issue is 1321.
- ii) The face amount is 1111.
- iii) The annual coupon rate is 10%.
- iv) The bond is callable for 1111 immediately after the payment of either the 18th or 19th coupon.
Calculate the minimum possible annual effective yield rate that you can earn.
- A) 7.881%
- B) 7.937%
- C) 7.985%
- D) 8.028%
- E) 8.065%
Answer this question and see the worked solution