At what price should a $1,000 , 8%, semiannual, level-coupon bond that matures in 12 years sell if the prevailing effective interest rate is 10% per annum? Round your answer to the
Nearest dollar.

Question

Quizplus · Accepted Answer

The bond's price is calculated using the present value of its future cash flows, which include semiannual coupon payments and the face value at maturity. With a 10% annual effective interest rate, the semiannual rate is 5%. The bond's price is approximately $877 when these cash flows are discounted at this rate.

At What Price Should a $1,000 , 8%, Semiannual, Level-Coupon