Worked solution · Exam FM
This Exam FM sample reference tests Bond Pricing and Yields. Per unit face, coupon rate 2.25i makes price equal to 2.25 minus 1.25 times v to the term. The first premium implies v to the eighteenth = 0.5120; the second premium then gives v to the n = 0.64, resulting in n = 12 and choice B.
Independent solution
Setup
Price each bond per unit face using coupon rate 2.25 times yield.
Model
Use the 18-year price to recover the annual discount factor.
Compute
The second price gives v to the n = 0.64. Dividing logarithms gives n = 12.000000.
Answer
The second bond has a 12-year term, so choice B is correct.
Test the method on unseen problems
30 original bonds problems with complete solutions and wrong-choice analysis. Written for Exam FM, not copied from the SOA set. One-time $19 PDF.
Original practice · fully worked
At a 4% annual yield, a 15-year bond has coupon rate k times its yield and sells for 1.30 per unit face. Another bond has the same coupon-to-yield multiple and an eight-year term. Calculate its price per unit face.
The 15-year price calibrates coupon multiple k = 1.6746. Applying that multiple to the eight-year discount factor gives price ratio 1.1817, choice E.
Setup
Use the first bond's price to solve the coupon-to-yield multiple.
Model
Apply the recovered multiple to the eight-year bond.
Compute
The calibrated multiple is 1.67455825, and the second price ratio is 1.18166514.
Answer
The eight-year price is 1.1817 per unit face, selecting choice E.
Keep practicing
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
Keep studying
Work through the related free solutions for this topic, review the formulas you used, or keep every current Exam FM solution in one searchable PDF.
