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# a debenture pays half yearly interest rate of 6% per anum and

### Resolved Question:

a debenture pays half yearly interest rate of 6% per anum and has 4 years to run to maturity. find its price (per \$100 face value to yield 8%pa covertible half yearly. give your answers in dollars and cents to 2 decimal places.
Submitted: 6 years ago.
Category: Homework
Expert:  Linda_us replied 6 years ago.
Hi Nathabhooton

The bond price would be equal to \$93.27.

Regards

LInda
Customer: replied 6 years ago.
Expert:  Linda_us replied 6 years ago.

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Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7290
Experience: Post Graduate Diploma in Management (MBA)
Expert:  Linda_us replied 6 years ago.
FORMATING IT AGAIN

Value of the Bond is calculated as sum of PV of interest & principal to be received.

Since it pay half yearly interest so interest amount = (100*6%)/2 = \$3
Also we have to use half yearly yield which is 8/2=4%

Bond Value = 3/(1.04) + 3/(1.04)^2 +3/(1.04)^3 +3/(1.04)^4 +3/(1.04)^5 +3/(1.04)^6 +3/(1.04)^7 +3/(1.04)^8 +100/(1.04)^8 = 93.27

This is also show in attached excel sheet in the above solution.

Regards Linda

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