A $1,000 face value strip bond has 19 years remaining until maturity. What is its price if the market rate of return on such bonds is 3.9% compounded semi-annually?

Compounded Semi-annually

An interest calculation method where interest is calculated and added to the principal twice a year.

Strip Bond

A financial instrument representing debt, where the main amount and the interest payments have been separated and are traded independently.

Market Rate

The prevailing interest rate available in the marketplace for loans or investments of a similar risk and maturity.

Master the concept of compound interest and its calculation techniques for multiple compounding frequencies.
Calculate the current worth of a future sum when accounting for the value of money over time.

Verified Answer

Final Answer :

$480.05

Learning Objectives

Master the concept of compound interest and its calculation techniques for multiple compounding frequencies.
Calculate the current worth of a future sum when accounting for the value of money over time.