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.

Answer 1

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