Number of periods to maturity = n = 20 semiannual periods |
Yield to Maturity = r = 0.1/2 = 0.05 |
Face Value FV = $1000 |
Semiannual Coupon Payment P = 0.08*1000/2 = $40 |
Hence, PV = P/(1+r) + P/(1+r)2 + .... + P/(1+r)n + FV/(1+r)n |
= P[1 - (1+r)-n]/r + FV/(1+r)n = 40[1-(1+0.1)-20]/0.1 + 1000/(1+0.1)20 = $489.19 |
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