A Treasury bond matures in 17 years,pays interest semiannually,and carries a coupon rate of 3.5 percent.How much are you willing to pay for a $1,000 face value bond if you desire a rate of return of 4.25 percent?

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Quizplus · Accepted Answer

Bond value = [(.035 × $1,000)/2] × ({1 - 1/[1 + (.0425/2)]^{17 × 2}}/(.0425/2))+ {$1,000/[1 + (.0425/2)]^{17 × 2}} = $909.86

A Treasury Bond Matures in 17 Years,pays Interest Semiannually,and Carries