Homework Answers
Redemption value is calculated using FV function in Excel :
rate = 6%/2 (converting annual yield into semiannual yield)
nper = 12 * 2 (12 years to maturity with 2 semiannual coupon payments each year)
pmt = 100 * 7% / 2 (semiannual coupon payment = face value * coupon rate / 2)
pv = -115.84 (Price of bond. This is entered with a negative sign because it is a cash outflow to buy the bond).
FV is calculated to be $114.99. This is the redemption value.
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