Question

A PREPA bond matures in 15 years and pays $ 80 semi-annually and $ 1,000 when due. The prevailing market rate is 10% per year. What is the present value of the bond?

a)$1,460.84

b)$1,010.84

c) $996.96

d) $1,000.00

Answer #1

**Given,**

**Par value = $1000**

**Maturity = 15 years**

**Semi annual coupon payment (C) = $80**

**Market interest rate = 10% or 0.10**

**Solution :-**

**Semi annual maturity (n) = 15 years x 2 =
30**

**Semi annual market interest rate (r) = 0.10/2 =
0.05**

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