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Financial Mathematics Old FM Forum

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Old 08-01-2017, 11:59 AM
gpecci gpecci is offline
Join Date: Jun 2017
Studying for FM
College: The Ohio State University - Junior
Posts: 30
Default Premium/Discount Formula (Bonds)

P=Fr a angle n +Cv^n

I understand that with a bit of substitution with the above formula, you get:
P=C + (Fr-Ci) * a angle n
=C + (Cg - Ci) * a angle n

The ASM tries to explain why this formula should be intuitive and make sense, but I'm not understanding it.

Can anyone try to explain it?
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Old 08-02-2017, 05:09 PM
Academic Actuary Academic Actuary is offline
Join Date: Sep 2009
Posts: 8,875

I wouldn't get hung up on these alternative bond formulas. I don't think I have ever seen a problem where you need them.
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