Question

A semi-annual coupon bond with a par value of $100 and a coupon rate of 8%, and has 10 years to maturity. What is the value of the bond to an investor who demands a 5% annual required rate of return.

par value, FV = ____

each payment, PMT = ___

number of payments, N = ___

required rate of return per payment interval, I/YR = __ % (keep one decimal place)

value of bond, PV = _____ (no sign, only positive number; keep at least two decimal places)

Answer 1

par value, FV = 100

each payment, PMT = 40 (=8% * $100/2 semi-annually)

number of payments, N = 20 (=10 * 2 semi-annual periods)

required rate of return per payment interval, I/YR = 2.5 % (=5%/2 semi-annually)

value of bond, PV = 684.59