Assume WhirledCom has an issue of 15 year $1000 par value bonds that pay 6% interest, semiannually Futher asssume that today's required rate of return on htese bonds is 9% How much would these bonds be worth today? Round off to the nearest $1

Answer 1

$1,000. @ 9% for 15 years, compounded sem0-annually.

Pt = Po(1+r)^n.

r = (9% / 2) /100% = 0.045 = S-APR expressed a a decimal.

n = 2comp./yr * 15yrs = 30 Compounding periods.

Pt = $1000(1.045)^30 = $3745.