Engineering Board Exam Reviewer · Bonds · medium
A P100,000 bond with an 8% coupon paid semiannually matures in 10 years. Find its price if the yield is 10% compounded semiannually.
- P100,000
- P87,537.79
- P87,710.87
- P64,713.20
Answer
B. P87,537.79
Solution
Coupon =0.08/2(100,000)=P4,000 per half-year; i=5%, n=20. Price =4,000(P/A,5%,20)+100,000(P/F,5%,20)=4,000(12.4622)+100,000(0.376889)=P87,537.79.
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