FM for Actuaries

Bonds and Bond Pricing 209
Half- Coupon Effective Amortized amount Book
year payment interest earned of premium value
0
1
2 94.26
3 −1.05 95.31
4 3.34 −1.09 96.40
6.13 Samurai bonds are yen-denominated bonds issued in Japan by non-Japanese
companies. State two possible reasons for non-Japanese companies to issue
Samurai bonds.
6.14 Fill in the missing values of the following excerpt of a bond amortization
schedule for a $100 par value 10-year bond with semiannual coupons and
redeemable at par:
Half- Coupon Effective Amortized amount Book
year payment interest earned of premium value
8
9
10 2.62 0.38 104.38
11
6.15 The following shows the information of an investment-grade bond when it
was issued in 2002.
Type of Bond Corporate bond
Issue Date Oct 28, 2002
Maturity Date Oct 28, 2012
Face Value $1,000
Coupon Rate 6.8% payable semiannually
Yield Rate 7.4% convertible semiannually
The bond is redeemable at par and coupons are payable on October 28 and
April 28 every year. An investor purchased the bond on October 28, 2007
immediately after the coupon was paid at a purchase price of $967.5 under
the prevailing interest rate, and sold the bond on March 30, 2008. Assuming
that the market interest rate is constant in the holding period, calculate the
bond’s dirty price.