Question

A bond with a face value of $500,000 pays quarterly interest of 2% per each period. Twenty-six interest payments remain before the bond matures. How much would you be willing to pay for this bond today if the next interest payment is due now and you want earn 10% compounded quarterly on your money?

Answer 1

so you will receive 26 payments of 10,000 plus a single final payment of 500,000 at the end of 26 periods.
You wish to gain 10% per annum compounded quarterly , or
.025 per quarter
PV = 10000(1 - 1.025^-26)/.025 + 500000(1.025)^-26
= ....