Problem:
Consider a bond with a par value of $1,000 that will mature in 10 years. You are given that the investors' required rate of return is 5% per annum.
(a) Calculate the price of the bond to the nearest cent if the coupon interest rate is 6% per annum, paid annually.
(b) Calculate the price of the bond to the nearest cent if the coupon interest rate is 6% per annum, paid half-yearly.
(c) Explain why the answers to parts (a) and (b) must be more than the par value of the bond.
Additional Information:
This question basically belongs to the Finance as well as it explains about computation of price of bond with coupon interest rate given and paid annually and half-yearly.