A $1,000 United States Treasury bond with a maturity date 20 years from now and a coupon rate of 4 percent has a required rate of return of 4 percent. Calculate the value of the bond if annual interest rate payment is in force.

Strip the bond into an interest only bond and a face value only bond. That is, create a bond that has only the present value of the interest payments and one that is only the present value of the Face value. Which bond has more interest rate risk? Which bond has more default risk?

Now say that instead of annual payments, the Treasury makes payments every six months. Recalculate the value of your stripped bonds. Explain the results.

I think these are the calculation answers, but I am struggling with the default risk and rate risk part of the question

PV (annual) $1000

PV - Interest Only (Annual) $543.61

PV - Face Value Only (Annual) $456.39

PV (semi-annual) $1000

PV - Interest only (semi-annual) $547.11

Face Value (Semi-annual) $452.89