Original practice · fully worked
Original variant: specified-coupon discount accumulation from known bond terms
A sixteen-period bond pays 30 each period, redeems 1,200, and yields 4% per period. Calculate the accumulation of discount included in payment 6.
- A
11.69 - B
12.28 - C
12.86 - D
13.45 - E
14.03
Answer and calculation
The final-period yield-interest excess is 1,200 times 4% minus 30, or 18. Moving eleven progression positions back to payment 6 gives discount accumulation 11.69, choice A.
Setup
Setup
Compute the final-period discount accumulation as yield interest on redemption less coupon.
A16=1200(0.04)−30=18 Model
Model
Discount that amount through n minus k plus 1 progression positions to payment 6.
A6=A16(1.04)−(16−6+1) Compute
Compute
The payment-6 accumulation is 11.692457.
A6=11.69245677 Answer
Answer
The discount accumulation is 11.69, selecting choice A.
A6≈11.69(A) 