A $5000 Bond That Pays 6% Semi-Annually Is Redeemable at Par

question 1

Essay

A $5000 bond that pays 6% semi-annually is redeemable at par in 14 years. Calculate the purchase price if it is sold to yield 8% compounded semi-annually.

---

Definitions:

Financial Intermediaries

Financial institutions through which savers can indirectly provide funds to borrowers

Financial Institutions

Organizations that provide financial services, including banks, insurance companies, and investment firms.

Financial Markets

Financial institutions through which savers can directly provide funds to borrowers

Investment

The allocation of resources, often money, in the hope of generating an income or profit.