Answer:
The price of the bonds = $864.10
Explanation:
The value of the bond is the present value (PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV) discounted at the yield rate
Value of Bond = PV of interest + PV of RV
The PV of interest payment
A ×(1- (1+r)^(-n))/r
A- interest payment, r- interest rate, n- number of years
Interest payment = 6%× 1000 1/2=$30
Semi- interest yield = 8%/2 = 4%
PV = 30 × (1- 1.04^(-10×2))/0.04= 407.7
PV of redemption value
PV = RV× (1+r)^(-n)
RV- Redemption value - 1,000, r- interest rate, number of years, number of years- 3
PV = 1000× 1.04^(-10×2) = 456.3869462
The value of bond = 407.709 + 456.38 = 864.09
The price of the bonds = $864.10
