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Purchase of a Bond with Semiannual Compounding Interest

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?

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Question 1
You should be willing to pay an amount equal to the present value of the cash flows generated by the bond. These are in the attached ...

Solution Summary

Explanation of how to tell the amount one should be willing to pay for a given bond, with calculations attached in Excel.

$2.19