Truly, Ltd. Has issued a bond with a face or par value of $1,000. The bond has a coupon rate of 6.8% and interest is paid semi-annually. The bond will mature in twenty years. The current yield or market rate on such bonds is 3.2% annually.

a) Set up a line diagram illustrating the cash flows involved in this bond issue. Use numbers from the problem.

b) Find the purchase price of the bond. Be sure to show the formulas with the appropriate numbers in them which you used to find the purchase price.

c) Find the current yield on the bond.