Input
Output
Evaluation Input Image

Calculate the value of bond B shown in the following table, all of which pay interest semiannually. <image 1>


The correct answer is $561.25

First, calculate the semiannual coupon payment: 1000121000 * 12% / 2 = 60

Next, calculate the number of semiannual periods until maturity: 20 years * 2 = 40 periods

Then, calculate the present value of the bond's future cash flows using the semiannual yield to maturity of 6%: 60/(1+0.06)1+60 / (1 + 0.06)^1 + 60 / (1 + 0.06)^2 + ... + 60/(1+0.06)40+60 / (1 + 0.06)^40 + 1000 / (1 + 0.06)^40 = $561.25


Difficulty: Hard

Subfield: Managerial Finance

Evaluation

Evaluation ID
b70de701-f1ce-44ca-a83d-a3e04e740a8a
Created
February 21, 2024
Raw Output
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        "content": " The correct answer is $561.25\n\nFirst, calculate the semiannual coupon payment:\n$1000 * 12% / 2 = $60\n\nNext, calculate the number of semiannual periods until maturity:\n20 years * 2 = 40 periods\n\nThen, calculate the present value of the bond's future cash flows using the semiannual yield to maturity of 6%:\n$60 / (1 + 0.06)^1 + $60 / (1 + 0.06)^2 + ... + $60 / (1 + 0.06)^40 + $1000 / (1 + 0.06)^40 = $561.25"
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