# FI Question

At the beginning of the year, a company issued a \$1,000 face value bond. Interest on that bond is paid semiannually, the annual coupon rate on the bond is 9%, and the bond matures in ten years. The market rate of interest at the time the bond was issued was 10% on an annual basis. The amount of the initial liability recorded for this bond was closest to: A. \$938. B. \$961. C. \$1,000. D. \$1,065.

A

solve for the price of the bond. pmt = 45 i = 5 fv = 1000 n = 20 pv?

FV = 1000 PMT = 45 N = 20 i = 5 Cal: PV = -937.69

Isn’t it a simple PV calculation?

OMG !! Dont know y but I was using 90 for PMT !!! I GIVE UPPPPPPPPPPPPPPPPPP !

I thought you are asking us to do something more than PV… I even confused if I should change the mod to BGN

For every FI question, pay CLOSE attention to whether it is an annual or semi-annual coupon payment. After enough problems, it is the first thing I look at and make adjustments to semi-annual coupon payments.

Also for Zero coupon bonds, always use semi annual compunding.

u can simly use the bond sheet on the BAII