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stira [4]
3 years ago
5

An investor purchases a 12-year, $1,000 par value bond that pays semiannual interest of $50. If the semiannual market rate of in

terest is 6%, what is the current market value of the bond

Business
1 answer:
WARRIOR [948]3 years ago
4 0

Answer:

the present value of the bond is $16.67

Explanation:

given data

time NPER = 12 year = 12 × 2 = 24 semi annual

bond value FV  = $1000

interest PMT = $50

rate of interest = 6% = \frac{0.06}{2} = 0.03 = 3 % semi annual

 

solution

we will apply here formula for current value in excel as given below

-PV(Rate;NPER;PMT;FV;type)    .............1

put here value as

rate = 3% and NPER = 24 , and FV = 1000 and PMT = $50

solve it we get

the present value of the bond is $16.67

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