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Thread: question from online sample problem

  1. #1
    Actuary.com - Level II Poster
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    Question question from online sample problem

    Hi everyone,

    I have a questions regarding #43, which can be founded through the link below

    http://www.beanactuary.com/exams/pdf/FM-09-05ques.pdf
    http://www.beanactuary.com/exams/pdf/FM-09-05sol.pdf

    This is a bond price between coupon date questions. I don't understand why
    they have the -400( (1.03)^(1/3) -1) / (1.03-1) as part of calculating for P_1/3

    Your help will be greatly appreciated! Thanks!!

  2. #2
    Actuary.com - Level I Poster
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    They subtract the accrued coupon. The price without subrtacting is referred to as the price-plus-accrued. Market value subtracts the accrued coupon.

  3. #3
    Actuary.com - Level II Poster
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    thanks for the reply. Now I see the difference between market value/clean price vs. the "full price"

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