A comp. has issued a bond with the following characteristics: Principal=1000, Time to maturity=20yrs. Coupon Rate=8%, compounded semiannually with semiannual payments. Calculate the value of this bond if the stated interest rate, compounded semiannually is 6%

My attempt: 1000(.08)/2 * (1-1/1.06^20) + (1000/1.06^20) = 40(11.4699) + 311.80 = 770.60

Nungesser Corporation’s outstanding bonds have a $1000 par value, a 9 percent semiannual coupon, 8 years to maturity, and an 8.5 percent YTM. What is the bond’s price?

Your attempt to calculate the value of the bond is almost correct, but there is a small error in the calculation. Let's go through the correct steps to get the accurate value.

To calculate the value of a bond, you need to find the present value of its future cash flows. In this case, the bond has a principal (or face value) of $1000 and a coupon rate of 8%.

Step 1: Calculate the semiannual coupon payment
The coupon rate is 8%, and it is compounded semiannually. The coupon payment is always calculated as (Principal * Coupon Rate) / 2. Therefore, in this case, the semiannual coupon payment would be (1000 * 0.08) / 2 = $40.

Step 2: Calculate the number of semiannual periods
The time to maturity is given as 20 years. Since the coupons are paid semiannually, there are 2*20 = 40 semiannual periods for this bond.

Step 3: Calculate the present value of the coupon payments
To calculate the present value of the coupon payments, you can use the formula for the present value of an ordinary annuity:

Coupon Value * [(1 - (1 + r)^(-n)) / r],

where r is the stated interest rate (compounded semiannually) and n is the number of semiannual periods.

In this case, the coupon value is $40, the stated interest rate is 6% (or 0.06 compounded semiannually), and we have 40 semiannual periods.

Present value of coupon payments = 40 * [(1 - (1 + 0.06)^(-40)) / 0.06] ≈ $620.92

Step 4: Calculate the present value of the face value (Principal)
To calculate the present value of the face value, you can simply discount it using the stated interest rate and the number of semiannual periods. The formula is:

Principal / (1 + r)^n,

where Principal is $1000, r is the stated interest rate (0.06 compounded semiannually), and n is the number of semiannual periods (40).

Present value of face value = 1000 / (1 + 0.06)^40 ≈ $376.80

Step 5: Calculate the total value of the bond
The total value of the bond is the sum of the present values of the coupon payments and the face value:

Total bond value = Present value of coupon payments + Present value of face value = $620.92 + $376.80 = $997.71

Therefore, the value of the bond, given a stated interest rate of 6% compounded semiannually, is approximately $997.71.