00:01
So we have a par value bond with a par of 1 ,000 maturing in 12 years with coupon rate r, or let's call it r equal to 14%, paid semi -annually.
00:17
So n is 2 is our frequency.
00:21
So that means that my semi -annual rate is r over n is 0 .14 over 2 is 0 .07.
00:28
So each coupon then is going to be my par value, 1 ,000 times r over n, 0 .07, and that is $70.
00:41
And we have a yield to maturity i of 13%, which is 0 .13.
00:53
And we want to know now what is the current price.
00:58
Okay, well the present value is the current price and it is gonna be then my coupons, which are $70 each, discounted by that yield to maturity.
01:16
So if this then is the yield to maturity, then my semiannual yield is going to be, let's see, square root of 1 .13 minus 1.
01:45
Because 1 plus, let's see here, i2 over 2 squared is going to be 1 .13...