PRMIA Exam 8006 Topic 7 Question 18 Discussion

Actual exam question for PRMIA's Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition exam

Question #: 18
Topic #: 7

[All Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition Questions]

Determine the price of a 3 year bond paying a 5% coupon. The 1,2 and 3 year spot rates are 5%, 6% and 7% respectively. Assume a face value of $100.

A$ 94.92

B$ 106.00

C$ 100.00

D$93.92

Show Suggested Answer

Suggested Answer: A

This question requires a calculation of the present value of the future cash flows from the bond. The correct answer is $94.92, calculated as =(5/(1 + 5%)) + (5/(1+ 6%)^2) + (105/(1 + 7%)^3).

by Shenika at May 05, 2022, 08:41 AM

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