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March 28, 2017

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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

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