A $30,000 bond pays interest at 4% on April 1st and October 1st of each year. If
ID: 2803163 • Letter: A
Question
A $30,000 bond pays interest at 4% on April 1st and October 1st of each year. If the bond is purchased on October 1 st, 2009 to yield 4.8% interest compounded semiannually and the bond matures on October 1 st 2013. Compute the purchase price and the discount,Please show steps for solving the question A $30,000 bond pays interest at 4% on April 1st and October 1st of each year. If the bond is purchased on October 1 st, 2009 to yield 4.8% interest compounded semiannually and the bond matures on October 1 st 2013. Compute the purchase price and the discount,
Please show steps for solving the question A $30,000 bond pays interest at 4% on April 1st and October 1st of each year. If the bond is purchased on October 1 st, 2009 to yield 4.8% interest compounded semiannually and the bond matures on October 1 st 2013. Compute the purchase price and the discount,
Please show steps for solving the question A $30,000 bond pays interest at 4% on April 1st and October 1st of each year. If the bond is purchased on October 1 st, 2009 to yield 4.8% interest compounded semiannually and the bond matures on October 1 st 2013. Compute the purchase price and the discount,
Please show steps for solving the question
Explanation / Answer
Using Financial Calculator
I/Y=2.4 [Since rate is given annual but we need semi annual rate so 4.8/2=2.4]
N=8 [since payment is semi-annually number of period is multiplied by 2 therefore 4×2=8]
FV=30000
PMT=2% of 30000=600[coupon rate is annual so it will be divided by 2 so 4/2% of par that is 30000]
Press CPT + PV
PV=29135.90
Purchase price=29135.90
Discount=30000-29135.90
Discount=864.1
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