You own government bonds with a face value of $2 million. The bonds mature 6 years and 3 months from today and have a coupon rate of 12%, paid semiannually. The next coupon will be paid in three months. The current yield on these bonds is 6% p.a. compounded semi-annually. How much are the bonds worth today? (Hint: You want to find the present value. Notice the coupon rate is higher than the market rate. Bonds should be at a premium.)

You own government bonds with a face value of $2 million. The bonds mature 6 years and 3 months from today and have a coupon rate of 12%, paid semiannually. The next coupon will be paid in three months. The current yield on these bonds is 6% p.a. compounded semi-annually. How much are the bonds worth today? (Hint: You want to find the present value. Notice the coupon rate is higher than the market rate. Bonds should be at a premium.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

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Question

You own government bonds with
a face value of $2 million. The
bonds mature 6 years and 3
months from today and have a
coupon rate of 12%, paid
semiannually. The next coupon
will be paid in three months. The
current yield on these bonds is 6%
p.a. compounded semi-annually.
How much are the bonds worth
today? (Hint: You want to find the
present value. Notice the coupon
rate is higher than the market
rate. Bonds should be at a
premium.)

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