Calculate the premium or discount on the sale of a 25-year, $1,000 Bell Canada bond that was issued six years ago with a coupon rate of 6% and is trading today at a yield rate of 5.5% (compounded semiannually).

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To calculate the premium or discount, we first need to find the current price of the bond. The bond has a face value of $1,000, a coupon rate of 6% (which means an annual coupon payment of $60), and 19 years left to maturity (25 years - 6 years = 19 years). The yield rate is 5.5% compounded semiannually, so the effective semiannual yield rate is 2.75% (5.5% / 2).The price of the bond can be calculated using the formula for the present value of an annuity (for the coupon payments) plus the present value of a lump sum (for the face value of the bond at maturity). The formula for the present value of an annuity is $PMT \times \frac{1 - (1 + r)^{-n}}{r}$, and the formula for the present value of a lump sum is $FV \times (1 + r)^{-n}$, where PMT is the semiannual coupon payment ($30, since $60 annually divided by 2), r is the semiannual yield rate (2.75% or 0.0275), and n is the total number of semiannual periods left (38, since 19 years times 2).Plugging the numbers into the formulas:- Present value of the annuity (coupon payments): $30 \times \frac{1 - (1 + 0.0275)^{-38}}{0.0275} \approx 697.93$- Present value of the lump sum (face value): $1000 \times (1 + 0.0275)^{-38} \approx 360.55$Adding these two amounts gives us the current price of the bond: $697.93 + 360.55 = 1058.48$.Since the bond is trading at $1,058.48 and its face value is $1,000, it is trading at a premium of $58.48.

Calculate the Premium or Discount on the Sale of a 25-Year