Using semiannual compounding, find the prices of the following bonds:

a. A 9.4%, 15-year bond priced to yield 7.6%.

b. A 7.6%,10-year bond priced to yield 9.4%.

c. A 12.5%, 20-year bond priced at 10.7%.

Repeat the problem using annual compounding. Then comment on the differences you found in the prices of the bonds.

A1. Using semiannual compounding, the price of the bond is $___.

B1. Using semiannual compounding, the price of the bond is $___.

C1. Using semiannual compounding, the price of the bond is $___.

A2. Using annual compounding, the price of the bond is $___.

B2. Using annual compounding, the price of the bond is $___.

C2. Using annual compounding, the price of the bond is $___.

Comment on the differences you found in the prices of the bonds.

Bonds selling at a premium sell at lower prices when the interest is compounded semiannually as opposed to annually. Accordingly, bonds selling at a discount sell at lower prices when the interest is compounded annually as opposed to semiannually.

Bonds selling at a premium sell at higher prices when the interest is compounded semiannually as opposed to annually. Accordingly, bonds selling at a discount sell at higher prices when the interest is compounded annually as opposed to semiannually.