You have just purchased a 12-year, $1,000 par value bond. The coupon rate on this bond is 11 percent annually, with interest being paid each 6 months. If you expect to earn a 12 percent simple rate of return on this bond, how much did you pay for it?

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Originally Posted by ap6364

You have just purchased a 12-year, $1,000 par value bond. The coupon rate on this bond is 11 percent annually, with interest being paid each 6 months. If you expect to earn a 12 percent simple rate of return on this bond, how much did you pay for it?

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I think this question is tricky because of the expect 12 percent simple rate of return;however this is what I've got.
PV=$937.25

Remember that rule always:

Future Value = Present Value * (1+rate of return%)
FV=PV(1+R%)