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Linda_us, Finance, Accounts & Homework Tutor
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Experience:  Post Graduate Diploma in Management (MBA)
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a debenture pays half yearly interest rate of 6% per anum and

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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.
Hi Nathabhooton

The bond price would be equal to $93.27.

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Customer: replied 7 years ago.
Hi thanks but can you please show your working

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Linda_us and 3 other Homework Specialists are ready to help you

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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