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    Present value of bond

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    A 10-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.5%
    (2.75% of face value every six months). The semiannually compounded interest rate
    is 5.2% (a six-month discount rate of 5.2/2 = 2.6%).

    a. What is the present value of the bond?
    b. Generate a graph or table showing how the bond's present value changes for semiannually
    compounded interest rates between 1% and 15%.

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    Solution Summary

    The solution explains how to calculate the present value of bond and how it changes with interest rates