A 20-year bond pays 12% annual interest in semi-annual payments.The current market yield to maturity is 10%.The appropriate interest factors should use 5% for 40 periods (by tables or calculator).

Question

Quizplus · Accepted Answer

To calculate the bond price, we need to use the appropriate interest factors. Since the bond pays semi-annual interest, we need to use the semi-annual market yield, which is 5% (10%/2). Using this rate and the number of periods (40), we can find the appropriate interest factor to calculate the bond price. Therefore, the statement is true.

A 20-Year Bond Pays 12% Annual Interest in Semi-Annual Payments