I wrote an exam last week and saw an almost identical questions like this on it. I couldn't figure it out for the life of me and still can't
The problem read
What is the present value of the SECOND COUPON of a 5% semi-annual pay bond trading at 92, assuming a discount rate of 7%.
(Base your answers on $1,000 face.)
a) $21.47
b) $21.84
c) $23.34
d) $43.67
I did this on my calculator by plugging in the following
FV - 1000
PMT - 92x .05/2 = 4.60
PV - ?
I/Y - 7% / 2 = 3.5
N - ?
Where am I going wrong? I know the answer is 23.34, but I don't know how to calculate it.
The problem read
What is the present value of the SECOND COUPON of a 5% semi-annual pay bond trading at 92, assuming a discount rate of 7%.
(Base your answers on $1,000 face.)
a) $21.47
b) $21.84
c) $23.34
d) $43.67
I did this on my calculator by plugging in the following
FV - 1000
PMT - 92x .05/2 = 4.60
PV - ?
I/Y - 7% / 2 = 3.5
N - ?
Where am I going wrong? I know the answer is 23.34, but I don't know how to calculate it.