A bond pays 7% yearly interest in semi-annual payments for 10 years. The current yield on similar bonds is 9%. To determine the market value of this bond, you must
A)find the interest factors (IFs) for 20 periods at 9%.
B)find the interest factors (IFs) for 10 periods at 7%.
C)find the interest factors (IFs) for 10 periods at 4.5%.
D)find the interest factors (IFs) for 20 periods at 4.5%.

Question

Quizplus · Accepted Answer

The bond pays interest semi-annually, so you need to calculate for 20 periods (10 years x 2). The semi-annual yield is half of the annual yield, so use 4.5% (9% / 2) for the interest factors.

A Bond Pays 7% Yearly Interest in Semi-Annual Payments for 10