16. How much should you pay for a $1,000-face value bond with 6% coupon, semi-annual
payments, and 7 years to maturity if the annual interest rate applicable to bonds of
same quality and maturity is 4%?
A) $887
B) $888
C) $1,000
D) $1,120
E) $1,121
Answer E
Price = $30 x PVIFA(2%,14)+ $1,000 x (1.02)
-14 = $1,121.
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