You bought a $1000 corporate bond for $900 3 years ago. It is paying $30 in inte

Question

You bought a $1000 corporate bond for $900 3 years ago. It is paying $30 in interest at the end of every 6 months, and it matures in 4 more years. Compute the its coupon rate. Compute its current value, assuming the market interest rate for such investments is 5% per year, compounded semiannually.
You bought a $1000 corporate bond for $900 3 years ago. It is paying $30 in interest at the end of every 6 months, and it matures in 4 more years. Compute the its coupon rate. Compute its current value, assuming the market interest rate for such investments is 5% per year, compounded semiannually.
You bought a $1000 corporate bond for $900 3 years ago. It is paying $30 in interest at the end of every 6 months, and it matures in 4 more years. Compute the its coupon rate. Compute its current value, assuming the market interest rate for such investments is 5% per year, compounded semiannually.

Explanation / Answer

Coupon rate = 30/1000*2 = 6%

Current value = 30/(1+5%/2) + 30/(1+5%/2)^2 + 30/(1+5%/2)^3 + 30/(1+5%/2)^4 + 30/(1+5%/2)^5 + 30/(1+5%/2)^6 + 30/(1+5%/2)^7 + 1030/(1+5%/2)^8 = $1035.85

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