A 6-year bond which pays 8 percent interest semiannually sells at par ($1,000). Another 6-year bond of equal risk pays 8 percent interest annually. Both bonds are non-callable and have a face value of $1,000. What is the price of the bond which pays annual interest?

Question

Quizplus · Accepted Answer

The bond paying annual interest will also sell at par ($1,000) because both bonds have the same coupon rate and yield, and the market conditions are the same.

A 6-Year Bond Which Pays 8 Percent Interest Semiannually Sells