Hi Hope everyone is doing well and is understanding the course Just a quick question on high-income bonds In chapter 2 page 26 , it says that high income bonds are backed by temporary annuities, zero-coupon bonds and call options. In chapter 14 page 13, it says that high income bonds are backed with zero coupon bonds and call options. I just want to make sure that both of those are acceptable backings? Thanks
Hi - I'm not able to reconcile your chapter and page references to the current version of the SA2 course, so it is worth checking that you have the latest version. However, I can see where such references are made (in Chapters 1 and 13). The IFoA's Core Reading quoted in Chapter 1 refers to the use of 'a temporary annuity to provide the income', so the examiners might also expect such a statement. However, a series of zero-coupon bonds maturing at each of the income dates would have the same outcome, so should be equally valid (and perhaps more likely in practice?).
Hi Lindsay Sorry, I meant chapter 1, but the other reference to chapter 14 (Asset Liability modelling) is right. My notes say they are for the 2024 exams, but I am worried now that something has gone wrong Many thanks
Sorry yes, I've just done the same - think I must have got my chapter and page numbers round the wrong way: Chapter 14 it is!
Hi Can you please help if there would be any mortality guarantees under a high income bond? If not, then would there be longevity risk under this product? Thank you
As stated in the course (Chapter 1 near the bottom of page 24), the death benefit would normally be guaranteed to be not less than the single premium.
