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1.We discussed earlier an 7% coupon, 30-year maturity bond with par value of $1,000 paying 60...

1.We discussed earlier an 7% coupon, 30-year maturity bond with par value of $1,000 paying 60 semiannual coupon payments of $40 each. Suppose that the interest rate is 6% annually, or r = 3% per six-month period. Then the value of the bond can be written as

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Answer #1

Value of the Bond =

Where r is the discounting rate of a compounding period i.e. 6%/2 = 3%

And n is the no of Compounding periods 30 years * 2 = 60

Coupon 8%/2 = 4%

=

= $1276.76

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