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You purchased a $10,000 bond maturing in 5 years. The coupon rate is 8% payable semi- annually. If the market rate is 7.3% compounded semi-annually,

You purchased a $10,000 bond maturing in 5 years. The coupon rate is 8% payable semi- annually. If the market rate is 7.3% compounded semi-annually, what is the purchase price of the bond?  


2. You have a bond with a $1,000 face value. It was issued on March 15, 2002 and matures 25 years later on March 15, 2027. If you purchased this bond on October 5, 2008, what was the purchase price? The coupon rate is 5.5% payable semi-annually and the market interest rate is 6.0% compounded semi-annually.   


Note: the time between October 5, 2008 and September 15, 2008 is 20 days.                            


3. You have a bond with a $1,000 face value. It was issued on Jan 1, 2006 and matures 15 years later on Jan 1, 2021. If you purchased this bond on April 15, 2006, what was the purchase price? The coupon rate is 4% payable semi-annually and the market interest rate is 4.5% compounded semi-annually.               


Note: the time between Jan 1, 2006 and Apr 15, 2006 is 104 days.

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SOLUTION 1 To calculate the purchase price of the bond we can use the formula for the present value of a bond PV C 1 1 r2n2 r2 F 1 r2n Where PV Presen... blur-text-image

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