Answer:
Total $1,091.0030
Explanation:
The market value of the bond will be the sum of the present value of the cuopon payment and the maturity date:
present alue of cuopon payment will be calculate as present value of an ordinary annuity:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 42.25 Â (1,000 face value x 8.45% /2 payment per year)
time 21 (10 years at 2 payment per year+ 1 payment)
rate 0.036 Â (here we use the YTM rate /2 because there are 2 payment per year)
[tex]42.25 \times \frac{1-(1+0.036)^{-21} }{0.036} = PV\\[/tex]
PV $615.1803
Then, for the present value at maturity, we calculate the present value of a lump sum
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex] Â
Maturity  1,000.00
time  21.00
rate  0.036
[tex]\frac{1000}{(1 + 0.036)^{21} } = PV[/tex] Â
PV Â 475.82
Finally, we add them both together
PV c $615.1803
PV m  $475.8227
Total $1,091.0030
