Question

You are considering a 20-year, $1,000 par value bond. Its coupon rate is 11%, and interest is paid semiannually. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

Open spreadsheet

If you require an "effective" annual interest rate (not a nominal rate) of 11.28%, how much should you be willing to pay for the bond? Do not round intermediate steps. Round your answer to the nearest cent.

Answer 1

given effective annual rate is 11.28%

so now we need to find rate for 6 months

let rate for 6 months be x

(1+x)^2 = 1.1128

so x is 5.4893%

value we pay today is 1001.72

extremely sorry for the intial mistake didnt take the effective rate , i can understand your frustration mistake was on my side, will make this wont happen again