The purchase price of a ₹1,000, 8% bond, dividends payable semi-annually redeemable at par in years, if the yield rate is to be 8% compounded semi-annually, is : [given $(1.04)^{-10}=0.6755$]
Answer & explanation
Correct answer: option 2
$\text{Face value}=1000.$
$\text{Coupon rate}=8\%\text{ p.a. paid semi-annually}.$
$\text{Coupon per half-year}= \frac{8\%}{2}\times1000=40.$
$\text{Yield rate}=8\%\text{ p.a. compounded semi-annually}.$
$\text{Yield per half-year}=4\%.$
$\text{Since coupon rate = yield rate,}$
$\text{Purchase price of bond}=\text{Face value}.$
$\text{Purchase price}=₹1000.$