6. Bond prices and yields (S3.1) A 10-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.5% (2.75% of face value every six months). The reported yield to maturity is 5.2% (a six-month 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%.