Worked solution · Exam FM
This Exam FM sample reference tests Bond Pricing and Yields. Per unit face, the combined price equals two discounted redemptions plus coupon rates rA and rA + 0.005 times the 30-year annuity factor. Solving the total price ratio 3 gives rA = 10.78%, choice B.
Independent solution
Setup
Write the two 30-year prices per 1,000 face at the common 7% yield.
Model
Divide the total price by 1,000 and combine like terms.
Compute
Solving gives Bond A coupon rate 10.779320%.
Answer
Bond A's annual coupon rate is approximately 10.78%, selecting choice B.
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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
Two 30-year 1,000-face bonds both yield 7% annually. Bond A's coupon rate is 6%; Bond B's coupon rate is 6% plus an unknown spread s. Their combined price is 1875.91. Calculate s.
Subtracting the two known 6% coupon streams and both redemptions from the quoted total leaves s times the 30-year annuity factor. The spread is 1.00%, choice E.
Setup
Write the combined price at the common 7% yield.
Model
Remove both known redemption values and the two 6% coupon components.
Compute
Solving gives spread 1.000000%.
Answer
The coupon-rate spread is 1.00%, selecting choice E.
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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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