You buy a government bond that pays interset twice a year. The interset payment is $300 each six months. The bond matures in six years. The face value of the bond is $10,000. The annual market interset rate is 6 percent.
a. What is the present value of the bond? show your work.
b. After six months go by, you receive the first interest payment of $300. The annual market interset rate has declined to 5 percent and you decide to sell the bond. What is the bond’s present value when you sell it? show your work.
c. What is your total return from owing the bond for six months ( expressed at annual rate, in percentage points, with two decimals)?
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