I’ve seen inconsistency in CFAI official questions whereby if there is a three year bond, say the coupon is 5 so the value at year 3 is 105 for all nodes, for the second year some take 105/spot rate year 2 and that is the answer. Then some take 105/spot rate + coupon of 5.
Why am I seeing differences here? Is it to do with embedded versus non-embedded bond?
Thanks in advance
In addition, some questions discount the coupon and some add the coupon after discounting (giving a different answer) - what is the reason for this?
I know what you’re talking about. You have to read all of the details in the question. In this specific case, it was a two year bond, but they gave you a three-year tree, so you wouldn’t be using the last year of rates, only year one and two. Tricky…
As for your second question, I don’t think I know what you’re talking about. Do you have a question you’re referencing?