acst101 question (1 Viewer)

[clairegirl]

im having so much trouble with this question

acturial pple help me

A $1,000 bond has coupons (interest payments) at j2 = 5.7% and is redeemable at 102 on 1 May 2014. Find the purchase price on 1 November 2005 if the desired yield is 8.1% per annum convertible half-yearly.

my equation of value that i made is

p= 32a(0.045,29) + 103(1.045)^-29

the answer is 808.27 but i keep getting

541.44 2c

 

[Tabris]

I dont get that answer

heres how i did it


interest coupon payment is (0.057/2)* 1000 which is 28.5 per time period

Yield is 0.081 convertible half yearly meaning j2 = 0.081 so the yield is 0.0405

TIme period is 17 since 1st may 2005 is 18 time periods (exactly 9 years) then less 1 since its 1 November is half year ahead.

redemption at 102 means (1000/100)* 102 = 1020

SO equation should be

28.5a(0.0405, 17) + 1020 (1.0405)-17 = 864.76



ACST 101 most of the time gets on the nerves, i can get the exercises in the textbook right, but when it comes to assignment, it is always 1 time period off from the real answer...so annoying! especially counting days! bringing back, brining forward, or forget to multiply interest rate to get j1 or j2 etc.

 

[Tabris]

BTW watch out for assignment 9 and 10, they are getting damn tricky, i stuffed up assignment 10 the triple weighting one (assignments one to 9 are out of 2/3 each and assignments 10 and 11 are out of 2 each

Good idea to do practice assignment then work on the real one, otherwise u might miss out on some easy marks due to silly mistakes (like me)

 

[clairegirl]

heyy i got the answer

btw thanx for the help, i had to go see the unit co ordinator the other day, he said i'ma fail if i don't put some work in, which i think is true

the equation of value is actually
p = 32a (0.045, 27) + 1030 (1.045)^-27

p = 808.27 2dc

which is the actual answer it says yay

 

[Grizzly]

anne, why is each coupon payment 32 ? when the coupon rate is j2=5.7% ?
and why is the face value 1030 if redeemed at 102 ?

lol, i musta forgot more acst101 than i thought.

 

[Tabris]

Your right Griz, i just done that topic...thought something clairegirl wrote wasnt right.

Anyway how did u jump into the UNSW commerce bandwagon? I might do the same, u need a D average?

 

[-=«MÄLÅÇhïtÊ»=-]

i fink clairegal typed the question wrong..
i dun see how she can get 27 or 29 coupon payments from period of 2005 to 2014...

 

[Grizzly]

Anyway how did u jump into the UNSW commerce bandwagon? I might do the same, u need a D average?

Nope, got in with a CR average.