Answer:
a) 1,277 dollars
Explanation:
We have to solve for the present value of the coupon payment and maturity art the end of the bond life discounted at 6% annual rate:
Coupon payment
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
Coupon payment: 1,000 x 8% / 2 = 40
time 30 years x 2 = 60
market rate = 6% / 2 = 0.03
[tex]40 \times \frac{1-(1+0.03)^{-60} }{0.03} = PV\\[/tex]
PV $1,107.0225
Maturity
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity 1,000.00
time 60.00
rate 0.03
[tex]\frac{1000}{(1 + 0.03)^{60} } = PV[/tex]
PV 169.73
PV coupon $1,107.0225
PV maturity $ 169.7331
Total $1,276.7556
