Calculating the Maximum Price to Pay for a Bond
Assume that you wish to purchase a 10-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $50. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/calculating-the-maximum-price-to-pay-for-a-bond-7e6s
...and the discounting rate is 10%/2=5% for semi annual. Interest is an annuity and we use the PVIFA table to get the PV factor. For principal amount which is ...