P = Po*(1+r)n
Po = $1,000
r = (16%/2)/100% = 0.08 = Semi-annual %
rate.
n = 10yrs. * 2comp./yr = 20 Compounding periods.
P = 1000(1.08)^20 = $4660.96
I = P-Po
The Garcia Company’s bonds have a face value of $1,000, will mature in 10 years, and carry a coupon rate of 16 percent. Assume interest payments are made semiannually.
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