The bond purchased has a face value of $1000 and a coupon rate of 9.8%, compounded semi-annually, with a maturity of 10 years. After holding the bond for 3.5 years, the owner has collected 7 out of 20 semiannual coupon payments. To determine the bond's worth at the time of sale, the present value of the remaining 13 coupon payments of $49 each must be calculated using a discount rate of 4% (the market interest rate of 8% compounded semi-annually). The total present value at the time of sale includes the face value of the bond plus the present value of the remaining coupon payments.
PREREQUISITESInvestors, financial analysts, and anyone involved in bond trading or valuation will benefit from this discussion, particularly those looking to understand the implications of interest rate changes on bond pricing.
You've collected 7 of the 20 semiannual coupons, so 13 are left.natashamarie said: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.