Answer to Question #120110 in Finance for Elwy

Question

1. A $4,000 , 12% bond will be redeemed on
May 1,2008. Interest is payable semiannually
on May 1 and November 1.
Find the purchase price of the bond if the date of purchase is May 1, 1998 and
the yield rate is 10% compounded semi-annually.

Answer 1

$CF=\frac{4000\times0.12}{2}=240$

N=4000

rates from the table of discounts and multiples

$P=CF\times(FM4(\frac{r}{2};2\times n)+N\times(FM2(\frac{r}{2};2\times n)=240\times(FM4(5;20)+N\times(FM2(5;20)=240\times12.462+4000\times0.377=2 990,88+1508=4498.88$