Question

You bought a bond 8 years ago for​ $1,000. It has a​ $1,200 face value and a nominal annual bond rate of​ 10%, paid semiannually​ (so it pays​ 5% of the face value every 6​ months). You'd like to sell it now and get a nominal annual yield of​ 18%. How much should you sell the bond​ for?

Answer 1

Answer:

The correct answer is $1990.10.

Explanation:

According to the scenario, the given data are as follows:

Present value = $1,000

Time period = 8 years

Time period (Nper) ( semiannual) = 16

Bond rate semiannual = 5%

So, Semiannual Payment (pmt) = $1,200 × 5% = $60

Annual yield = 18%

So, Semiannual yield ( rate ) = 9%

So, by putting all this in financial calculator, we get the following result.

Attachment is attached below.

The future value is $1,990.10.