The current value is $808.21 if the annual discount rate is 7%.
The annual discount rate expresses the amount of interest paid or earned as a percentage of the stability at the cease of the yearly duration. it's miles related to but barely smaller than the powerful fee of interest, which expresses the quantity of interest as a percent of the balance at the beginning of the period.
Face Value of Bond = $1,000
Annual Coupon Rate = 7.00%
Semiannual Coupon Rate = 3.50%
Semiannual Coupon = 3.50% * $1,000
Semiannual Coupon = $35
Time to Maturity = 7 years
Semiannual Period = 14
Annual Interest Rate = 11.00%
Semiannual Interest Rate = 5.50%
Current Price = $35 * PVIFA(5.50%, 14) + $1,000 * PVIF(5.50%, 14)
Current Price = $35 * (1 - (1/1.055)^14) / 0.055 + $1,000 / 1.055^14
Current Price = $35 * 9.58965 + $1,000 * 0.47257
Current Price = $808.21
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