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majarm majarm
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6 years ago
A $100 000 bond bearing interest at 8% payable semi-annually is bought five years before maturity to yield 6% compounded annually. If the bond is redeemable at par, what is the purchase price?
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
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#1
6 years ago
FV = $100 000; PMT = $100000(0.08)0.5 = $4000; P/Y = 2; C/Y = 1; c =  ; n = 5(2) = 10;
i =   = 0.06; p =  - 1 = .029563014
PP = 100000(1.029563014)-10 + 4000
   = 100000(.7472581729) + 4000(8.549257745)
   = 74725.82 + 34197.03 = $108 922.85
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