Answer:
Total $53.0656 (millions)
Explanation:
We will need to add the present value of the coupon payment
and the present value of the maturity date
present value of the annuity:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C= 60 million x 5% /2 1.5
time= 20 years 2 payment per year = 40
rate = 6% annual = 0.06/2 = 0.03 semiannually
[tex]1.5 \times \frac{1-(1+0.03)^{-40} }{0.03} = PV\\[/tex]
PV $34.6722
present value of the bonds:
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 60
time 40
rate 0.03
[tex]\frac{60}{(1 + 0.03)^{40} } = PV[/tex]
PV $18.3934
The value of the bond will be the sum of both
PV c $34.6722
PV m $18.3934
Total $53.0656
