A $1000 par value 9% bond with semiannually coupons is callable 6 years after issue. The bond matures for $1000 at the end of ten years and is sold to yield a nominal rate of 4% convertible semiannually under the assumption that the bond will not be called. Find the redemption value at the end of 6 years that will provide the purchaser the same yield rate.

Q: what will the price be 6 years from now?

A: Bond price means discounting the future cashflows of the bond by using discounting factor.

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Q: The

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Q: price

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Q: what will the price be 5 years from now?

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Q: Find the Modified duration of the bond if it sells for $1,025.30.

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A: Price of bond is present value of the coupon payment and present value of the par value of bond.