Problem 1: A $1,000 bond has a coupon of 6 percent and matures


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Please help me with the semiannual calculation on question b. (attached)..The answer is $921, but I do not know how to get that answer…please show me the calculation, since i already have the answer. . Help.doc Problem 1: A $1,000 bond has a coupon of 6 percent and matures after 10 years. a. What would be the bond’s price if comparable debt yields 8 percent? Answer: annual interest payment: $866, semiannual interest payment: $864 Calculation: Annual PMT = $60; FV = $1000; N = 10; I = 8; PV =$-866 Semiannual: PMT = $60/2 = $30, I = 8 / 2 = 4, N = 10*2 = 20 PMT = $30; FV = $1000; N = 20; I = 4; PV = $ – 864 b. What would be the price if comparable debt yields 8 percent and the bond matures after five years? Answer: annual interest payment: $920, semiannual interest payment: $921 Calculation: Annual PMT = $60; FV = $1000; N = 5; I = 8; PV =$-920 Semiannual:

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