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The Professor
The Professor, Taught at USC Years Ago
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Experience:  Engineering Degree, Tutoring Experience, USC Faculty (Retired)
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assume that you wish to purchase a 25 year bond that has a

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assume that you wish to purchase a 25 year bond that has a maturity value of $1,000 and makes semiannual interest payments of $45. If you require a 7 percent nominal yield to maturity on this investment, what is the maximum price you cshould be willing to pay for the bond?
Submitted: 9 years ago.
Category: Homework
Customer: replied 9 years ago.
What does the semi annual have to do with it thought?
Expert:  The Professor replied 9 years ago.
Bonds that pay $45 interest twice a year - semiannually - thus actually pay $90 interest per year. On a $1000 investment that's 9%, on a $1000 face value bond that's a coupon rate of 9%.

I apologize for deleting my answer. The on-line bond calculators all report the same price to yield 7% ... $1233.10 ... but the formula I provided doesn't give the same answer, and thus the formula has an assumption in it that the bond calculators do not.

When I can explain the difference I will post a formula that gives the same answer.
Customer: replied 9 years ago.
Is it still $1,233 to purchase the bond?
Expert:  The Professor replied 9 years ago.

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