Can someone explain the steps to solve this problem please??

Question

On 9/1/08 I can buy a $1000 bond.

On 12/1/2015 it will Mature

I will get 6% interest payments twice a year.

9% will be my gain on this investment.

How much should I pay for this bond on 9/1/08?

Answer 1

Are you saying that you want a return of 9% of the present value of the investment?

If so, I think you could just use: F = P(1+i)^n, where P is how much you should invest, F is your gain plus investment, i is your interest rate, and n is the period of investment.  No easy way to break the periods up, since september and december are not 6 months apart.  You could either break up the period into n periods of six months between 9/1/08 and 12/1/15 or find the effective interest rate for one year.  You could also assume that 6% is nominal and break it down to 1% per month, and your periods would be in months.