A 10-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.5% (2.75%

of face value every six months). The semiannually compounded interest rate is 5.2% (a sixmonth discount rate of 5.2/2  2.6%).

a. What is the present value of the bond?

b. Generate a graph or table showing how the bond’s present value changes for semiannually compounded interest rates between 1% and 15%.

AppendixLO1