Problem 2. Bond valuation: Semiannual interest

To adjust the bond-valuation framework for semiannual interest, let n be the number of semiannual periods (2 number of years), r the semiannual interest rate (annual interest rate 2), C the semiannual coupon payment (annual coupon payment 2), and M the par value ($1,000).

Find the value of a bond maturing in 4 years with a $1000 par value and a coupon interest rate of 10% (5% paid semiannually) if the required return on similar bonds is 12% (6% paid semiannually).

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