Verified solution · Exam FM
This Exam FM sample reference tests Bond Valuation. Prospective book values after coupons six and seven are linear in coupon rate r; setting the discount accumulation BV₇ − BV₆ to 4.36 gives r = 4.29%, choice C.
Independent solution
Setup
The half-year yield is 3.6%, while the semiannual coupon is 500r.
Model
Write the two adjacent post-coupon book values from their remaining coupons and par redemption.
Compute
For a discount bond the book value increase in the seventh period is 4.36; solving that difference yields r = 0.0429.
Answer
The annual coupon rate is therefore about 4.3%, choice C.
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Error diagnosis
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Original practice · fully worked
Immediately after coupon 6, a par-redemption bond has book value 940. Its periodic yield is 5%. The book value immediately after coupon 7 is 950. Determine the coupon paid at coupon 7.
The recursion 950 = 940(1.05) − C gives coupon C = 37, choice C.
Setup
Book value first earns the periodic yield and then falls by the coupon paid.
Model
Insert the two adjacent post-coupon values into the one-period recursion.
Compute
Effective interest is 47, while book value rises by 10; the difference is a coupon of 37.
Answer
The coupon amount is 37, which is choice C.
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These references share syllabus concepts or sit nearby in the official sequence. All 96 Exam FM bonds practice problems.
Drill the method: Exam FM Bond Valuation, Pricing, and Yields problems
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ActuaryProof. “SOA Exam FM Sample Question #140 — Verified Solution.” Verified 2026-07-31.
Source reference: official SOA sample-question PDF. Last reviewed 2026-07-31.
