This Exam FM sample reference tests Zero-Coupon Redemption Accumulation. Setting that terminal amount to 100,000 gives X = 16,078. The result agrees with the published answer key, choice B.
These notes identify the calculation error associated with each wrong letter when that error is reproducible.
AChoice A (15,667) does not match the checked zero-coupon redemption accumulation result (16,078); no distinct standard one-step error is identifiable.
CChoice C (16,245) does not match the checked zero-coupon redemption accumulation result (16,078); no distinct standard one-step error is identifiable.
DChoice D (16,667) does not match the checked zero-coupon redemption accumulation result (16,078); no distinct standard one-step error is identifiable.
EChoice E (17,271) does not match the checked zero-coupon redemption accumulation result (16,078); no distinct standard one-step error is identifiable.
Original practice · fully worked
Original variant: total redemption from equal investments in three zeros
Three zero-coupon bonds cost 0.90, 0.92, and 0.95 per unit of redemption value. An investor places 2,000 into each bond. Calculate the total redemption amount received when all three mature.
A 6,000.00
B 6,247.83
C 6,381.74
D 6,501.40
E 6,742.11
Variant answer in brief
The three reciprocal-price amounts total 6501.40. Total redemption is 6,501.40, selecting choice D.
Setup
Setup
For each zero, face or redemption amount equals dollars invested divided by price per unit redemption.
Fk=2000/pk,p=(0.90,0.92,0.95)
Model
Model
Compute the three redemption amounts separately and add them; averaging prices before inversion is not valid.
The 2210-page Financial Mathematics Proof Manual reorganizes 461 verified Exam FM solutions by syllabus skill and adds formula proofs, error patterns, and original worked practice.
