Financial Discounting of Bonds Example 7-1A

2. Solution
n
n
( par * coupon%)
å (1+ return%)n
x=1
par
å (1+return_rate)last _n
x
Par value= 1,000
Coupon interest= .08
Rate of return= .12
N= 12
1
80
å (1+.12)1
1
7
80
å (1+.12)7
1
2
80
å (1+.12)2
1
8
80
å (1+.12)8
1
3
80
å (1+.12)3
1
9
80
å (1+.12)9
1
4
80
å (1+.12)4
1
10
80
å (1+.12)10
1
5
80
å (1+.12)5
1
11
80
å (1+.12)11
1
6
å (1+.12)
80
6
1
12
80
å (1+.12)12
1
12
å (1+.12)
1000
12
1

3. Answer
• $752.23
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