MHB Calculating Bond Value - 3.5 Yr Holding, 8% Coupon

[natashamarie]

You purchase a bond with a face value of $1000 and a coupon rate of 9.8% compounded semi-annually. The bond has a maturity of 10 years. How mush is the bond worth if you sell it after 3.5 years and the interest rate for similar bonds is 8% compounded semi-annually? Assume you clip the latest coupon before you sell it.

 

[Wilmer]

You purchase a bond with a face value of $1000 and a coupon rate of 9.8% compounded semi-annually. The bond has a maturity of 10 years. How mush is the bond worth if you sell it after 3.5 years and the interest rate for similar bonds is 8% compounded semi-annually? Assume you clip the latest coupon before you sell it.

You've collected 7 of the 20 semiannual coupons, so 13 are left.

The coupon amount = 1000 * .098 / 2 = 49 dollars.

So Present Value (at sale time) = 1000 + present value of 13 payments
of 49 dollars using i = .08/2 = .04 (4%).

Look up the formula for present value of an ordinary annuity; OK?