Answer:
Total $1,271.0564
Explanation:
We have bond of 10 years ago, so the bond is left with 5 years of life
we need to calculate the present value ofthe cuopon payment:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 50 (1,000 x 5%)
time 10 (5 years 2 payment a year)
rate 0.02 (4% annual divide by 2 to get semiannually)
[tex]50 \times \frac{1-(1+0.02)^{-10} }{0.02} = PV\\[/tex]
PV $449.1293
and the present value of the principal
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 1000
time 5
rate 0.04
[tex]\frac{1000}{(1 + 0.04)^{5} } = PV[/tex]
PV $821.9271
We add both to get the present value ofthe bond
PV c $449.1293
PV m $821.9271
Total $1,271.0564
