ERIC asked in 商業與財經投資 · 1 decade ago


You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?

1 Answer

  • 1 decade ago
    Favorite Answer

    first, caculate the effective annual rate of your requirement:

    (1+10%/2) ^2 - 1 = 10.25%

    input data as follow,

    1000 for FV

    60 for PMT

    20 for N (you receive $60 for every 6 months so that you'll receive 20 times in 10 year)

    5.125 for i ( 10.25 / 2 = 5.125, cuz the interest is paid for twice a year)

    then compute for PV, and the answer is -1107.9

    (the "minus" doesn't for the negative value here, but for the "way" the money goes to, which means "pay")

    so, if you want a 10.25% annual return, the highest price you pay for this bond is 1107.9

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