A 1000 par value 20-year bond with semiannual coupons (paid at the end of each six month period) and redeemable at maturity at 1050 is purchased for P to yield a nominal annual rate of 8.25% compounded semiannually. The first coupon is for 75, and each subsequent coupon is 3% great than the preceding coupon. Find P. Give your answer rounded to the nearest whole number (i.e. X).
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The nominal annual rate is 8.25%, so the semiannual interest rate is 8.25% / 2 = 4.125%. Show more…
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