The semiannual interest rate would now increase from 2.47% to r = 2 1 + 6%
Question:
The semiannual interest rate would now increase from 2.47% to r = 2 √
1 + 6% − 1 = √
1.06 − 1 ≈ 2.9563%
To get the bond’s new present value, reuse the annuity formula
This bond would have lost $3,951.72, or 4.3% of the original investment.
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