Principles of Corporate Finance
Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 3, Problem 6PS

Bond prices and yields A 10-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.5% (2.75% of face value every six months). The reported yield to maturity is 5.2% (a six-month discount rate of 5.2/2 = 2.6%).

  1. a) What is the present value of the bond?
  2. b) Generate a graph or table showing how the bond’s present value changes for semiannually compounded interest rates between 1% and 15%.
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Principles of Corporate Finance

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