Answer:
Total $1,155.6643
Explanation:
The bond market value will be the discounted cash flow from coupon payment and principal at maturity at the market rate of 6.4%
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 40.500 (1,000 x 8.1% / 2 payment per year)
time 28 (14 years x 2 payment per year)
rate 0.032 (6.4% annual / 2 = 3.2% semiannual)
[tex]40.5 \times \frac{1-(1+0.032)^{-28} }{0.032} = PV\\[/tex]
PV $741.6947
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 1,000.00
time 28.00
rate 0.032
[tex]\frac{1000}{(1 + 0.032)^{28} } = PV[/tex]
PV 413.97
PV c $741.6947
PV m $413.9696
Total $1,155.6643
