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feng 09-19-2015 09:01 PM

Coupon bond question
You want to purchase a 10-year coupon bond with semi-annual coupons and an annual coupon rate of 6%. The face value of the bond is $10,000. You observe a yield curve with spot rates that increase 25 basis points for every six month increase in the term of a loan. These rates are nominal, annual quotes. Given that the present value of a $2,000 face value zero-coupon 6-month bond is $1,941.75, what is the price of the 10-year bond? Assume the risk on both bonds is the same, and interest is compounded on a semi-annual basis. Provide calculations out to four decimal places for partial credit. Thanks for helping

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