Consider a bond (with par value = $1,000) paying a coupon rate of 7% per year semiannually when the market interest rate is only 3% per half-year. The bond has three years until maturity. a. Find the bond's price today and six months from now after the next coupon is paid. (Round your answers to 2 decimal places.)

Explanation:

Using a financial calculator; input the following;

Duration to maturity ; N = 3*2 = 6

Par value of the bond ; FV = 1000

Semiannual interest rate; I = 3%

Semiannual coupon payment;PMT = (7%/2)*1000 = 35

then compute the price; i.e the present value; CPT PV = 1027.09

The price after 6-months would be as follows;

Duration to maturity ; N = 2.5*2 = 5

Par value of the bond ; FV = 1000

Semiannual interest rate; I = 3%

Semiannual coupon payment;PMT = (7%/2)*1000 = 35

then compute the price; i.e the present value; CPT PV = 1022.90

answer; /// (b) i believe its that is paid to state and federal taxing authorities;

the answer would be voluntary exchange -

"the act of buyers and sellers freely and willingly engaging in market transactions. moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred."

hope this : )

-shy