# Bonds

Study Bonds for SOA Exam FM (weight 10–15%): worked examples, exam traps, a vendor chapter map, and a 5–7 day plan.

Canonical URL: https://exclam.ai/actuarial/exam-fm/topics/bonds/

[Actuarial](https://exclam.ai/actuarial/index.md)›[Exam FM](https://exclam.ai/actuarial/exam-fm/index.md)›Bonds

Exam FM topic · 10–15% of exam

Bond pricing, yield to maturity, premium and discount, and book value schedules.

[Back to Exam FM](https://exclam.ai/actuarial/exam-fm/index.md)

## Per-objective worked-example outlines

For each learning objective on Bonds, here is the approach an exam item would test — the setup, the ordering of your reasoning, and the formula or identity you need to bring to the page. Approaches, not full solutions, by design. Verify against the current [soa.org](https://www.soa.org/) syllabus before your sitting.

### Compute bond price given yield, coupon rate, par, and redemption amount

Setup

A bond has a stated coupon rate, par value, redemption value, term, and required yield, and you must price it.

Approach

Use the basic bond price formula: PV of coupons (level annuity at the yield) plus PV of redemption. Watch for redemption value not equal to par (callable bonds or special securities) and for semiannual coupons (use half the annual rate and twice the number of periods). Verify whether the yield is quoted as nominal convertible semiannually or as effective annual.

Key identity

P = Fr · a-angle-n + C · v^n, valued at the yield rate i.

### Construct bond amortization schedules for premium and discount bonds

Setup

A bond is bought at a premium or discount to par and you must track book value, coupon income, and amortization of premium or accretion of discount across periods.

Approach

Build a row-by-row schedule: interest earned = book value × yield, premium amortized (or discount accreted) = coupon - interest earned, new book value adjusted accordingly. The book value converges to the redemption value at maturity. Recognize that premium amortizes downward toward redemption; discount accretes upward.

Key identity

Book value at time t = Fr · a-angle-{n - t} + C · v^{n - t}.

### Calculate yield to maturity and yield to call

Setup

A bond price is given along with coupon, redemption, and call schedule, and you must find the yield.

Approach

Set the PV of cash flows equal to the price and solve for i. On the BA II Plus, use the bond worksheet or TVM keys with the call date as N when checking yield-to-call. For callable bonds, evaluate every plausible call date and take the worst (lowest yield) from the issuer's standpoint — the yield-to-worst.

Key identity

Yield-to-call uses the call date and call price in place of maturity and redemption.

## Common exam traps on Bonds

Recurring patterns where candidates lose points on Bonds-style items. Each entry pairs the trap with the fix.

Trap

Treating a nominal-annual yield convertible semiannually as the per-period rate.

Fix

Divide by 2 for the per-coupon-period rate and double n for the number of coupons.

Trap

Assuming par = redemption value when the question specifies otherwise.

Fix

Use F for par (which drives the coupon Fr) and C for redemption (which drives v^n); they can differ.

Trap

Computing premium amortization using coupon minus a fixed amount.

Fix

Premium amortized each period = coupon - book value × yield; the book value changes each period.

Trap

Choosing yield-to-maturity when a callable bond favors yield-to-call.

Fix

For premium bonds with embedded calls, compute yield to each call date and the maturity, then report the worst.

## Where to find Bonds in popular manuals

Pointers to where each major vendor covers this topic, so you can grab the right chapter without combing the full manual. We do not reproduce vendor content — just the location. Chapter and lesson numbers shift between editions; use these as a guide, not as a citation.

ASM

Bond pricing and amortization chapters

ACTEX

Bonds chapter including callable and other variations

Coaching Actuaries

Learn modules on Bonds; Adapt category "Bonds"

The Infinite Actuary

Bond pricing video block including amortization schedules

## 7-day Bonds micro plan

A focused 7-day sub-schedule for Bonds specifically, at roughly 1.5–2.5 hours per day. Drop it inside your full Exam FM plan as a single coverage module.

Day 1

Read the bond pricing chapter; build flashcards for the basic price formula and the Makeham, premium-discount identities.

Day 2

Drill 15 bond pricing problems using both the BA II Plus bond worksheet and manual TVM entries.

Day 3

Bond amortization schedules — build 3 schedules by hand, one premium, one discount, one at par.

Day 4

Yield-to-maturity and yield-to-call problems — 12 problems including a few callable bonds.

Day 5

Special bonds and inflation-protected bonds — 8 problems with non-standard redemption values.

Day 6

Mixed timed drill of 15 bond problems; flag any that took longer than 4 minutes.

Day 7

Re-do flagged problems and revisit the callable bond decision tree.

## How exclam.ai helps you master Bonds

### Flashcards from your manual

Upload your ACTEX Exam FM digital edition, scanned ASM pages, TIA handouts, or your own notes. exclam.ai extracts the Bonds sections and generates flashcards automatically, tuned to the exam traps above.

### Worked-example drilling

Each per-objective approach above maps to a quiz template. exclam.ai re-surfaces missed items until you can recall both the setup and the key identity from cold.

### FSRS spaced repetition

Because Bonds is 10–15% of your exam, losing it during review costs you. FSRS brings it back at the optimal moment.

## Bonds in the Exam FM context

SOA Exam FM has 8 topic areas. Bonds is weighted at approximately 10–15% of the exam, here is where it sits relative to the other topics.

| Topic area | Weight |
| --- | --- |
| Time Value of Money | 10–15% |
| Annuities | 15–20% |
| Loans | 10–15% |
| → Bonds | 10–15% |
| General Cash Flows and Portfolios | 15–20% |
| Immunization | 10–15% |
| Interest Rate Swaps | 0–5% |
| Determinants of Interest Rates | 0–10% |

## Other Exam FM topics

[Time Value of Money 10–15% Interest rates, discount rates, present and future value, and the relationships between different interest measurement conventions. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/time-value-of-money/index.md)

[Annuities 15–20% Level and varying annuities paid annually or more frequently, annuities due and immediate, and deferred annuities. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/annuities/index.md)

[Loans 10–15% Loan repayment, amortization schedules, sinking funds, and varying loan payments. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/loans/index.md)

[General Cash Flows and Portfolios 15–20% Valuing arbitrary cash flow streams, net present value, internal rate of return, dollar-weighted and time-weighted returns. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/general-cash-flows-and-portfolios/index.md)

[Immunization 10–15% Portfolio immunization strategies, Redington immunization, full immunization, and asset-liability matching. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/immunization/index.md)

[Interest Rate Swaps 0–5% Basic mechanics of interest rate swaps, including fixed and floating legs and swap rate determination. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/interest-rate-swaps/index.md)

[Determinants of Interest Rates 0–10% Economic and market factors that shape interest rates, including inflation, risk premiums, and the yield curve. Study this topic](https://exclam.ai/actuarial/exam-fm/topics/determinants-of-interest-rates/index.md)