Independent solution

How to solve this Bond Pricing and Yields question

Setup

Setup

The nominal coupon is 7.6% of 1,000 annually, so each half-year coupon is 38; the yield per half-year is 3%.

C=38C=38
j=0.06/2=0.03j=0.06/2=0.03

Model

Model

Four years remain after year 6, giving eight remaining semiannual cash-flow periods.

B6=38a8‾∣0.03+1000(1.03)−8B_6=38a_{\overline8|0.03}+1000(1.03)^{-8}

Compute

Compute

The prospective value of the remaining coupons and redemption is 1056.157538.

B6=1056.15753752B_6=1056.15753752

Answer

Answer

The book value is approximately 1,056, selecting choice B.

B6≈1056(B)\boxed{B_6\approx1056\quad\text{(B)}}

Calculator reproduction

BA II Plus keystrokes

Check END/BGN, period, sign, TVM, and cash-flow setup

  1. 2ND · CLR TVM · 8 · N · 3 · I/Y · 38 · PMT · 1000 · FV · CPT · PVPV = -1056.16The magnitude is the book value immediately after the coupon.