Question

You wish to know the appropriate price for a security that matures in 6 years. The security has a payout of $24,777.46, which is paid in one lump sum at maturity. The interest rate associated with this class of security is 1.63%, and interest is compounded semiannually. What is the current price of this security?

Answer =

Cash Flow =

R =

N =

Answer 1

Current price of security is $ 22, 477.86

Current price of security is the present value of cash flows from security.
Present value of cash flow	=	Future value	*	Discount factor
	=	$ 24,777.46	*	0.90719
	=	$ 22,477.86
Working:
Discount factor	=	(1+i)^-n		Where,
	=	(1+0.00815)^-12		i	=	1.63%/2	=	0.00815
	=	0.90718977		n	=	6*2	=	12