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Math Help - Bond Value

  1. #1
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    Bond Value

    I already have the answer (which follows the question in bold), but I am struggling with the setup for this problem. My solution at the very bottom is a little off. Any ideas as to where I am going in the wrong direction? How would I integrate the payment date correctly? Can anyone help? Thank you in advance!



    Princeton Corp 6s12 bonds pay interest semiannually. They will mature on October 15, 2012. The interest payment dates are April 15 and October 15. If your required rate of return is 8% per annum, how much should you pay for a $1,000 bond on April 16, 2010?
    [$955.48 ]

    B = 30[1-1.04-4]/.04 + 1000/1.044
    B = 108.8968567277056125485802317846+ 854.8041
    B = 963.70
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  2. #2
    MHF Contributor
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    Quote Originally Posted by danville View Post
    B = 30[1-1.04-4]/.04 + 1000/1.044
    B = 108.8968567277056125485802317846+ 854.8041
    B = 963.70
    Not sure what you're doing; anyhow, here's how it works:
    30(1 - 1/1.04^5) / .04 = 133.554...
    1000 / 1.04^5 = 821.927
    Add 'em up: 955.48 rounded

    ^ means "to the power"; REMEMBER that for your future posts!!

    EDIT: looking at your "work", looks like your only problem is using 4 periods instead of 5
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  3. #3
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    Thank you so much. This is my first experience with bonds.
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