computate the following?

Question

you intend to purchae a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your simple annual required rate of return is 10% with semiannual compounding, how much should you be willing to pay for this bond?

Answer 1

Here is the calculation:
Every six months during ten years you will get 60$, a total cashflow of 1200$ paid on average at T=5 years.
At T=10 years from now you will receive 1000$.
That is a total cashflow of 2200$ paid at
Taverage = (5*1200+10*1000)/2200 = 7.27 years.
As 1.1^7.27 = 2.00 I want to pay at most 2200/2 = 1100$
for the bond.

Note that these calculating can be done most simply with an Excel spreadsheet, using the IRR function.

Answer 2

$1000.00