Correct bond calculations in the United States usually involve semiannual periods because bond interest is typically paid twice a year.
where
P = the current market price of the bond
n = the number of semiannual periods to maturity
ytm = the semiannual yield to maturity to be solved for
c = the semiannual coupon in dollars
FV = the face value (or maturity value or par value)which in this discussion is always $1,000
What does this formula imply about the term structure of interest rates? How would real-world bond investors price bonds to correct for this?
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