Answer:
The correct answer is C.
Explanation:
Giving the following information:
A series of bond interest payments of $2,000 each paid semiannually for 4 years. The annual interest rate is 8%
First, we need to calculate the real interest rate:
Interest rate= 0.08/2= 0.04 semiannually
Now, we need to calculate the future value of the cash flow, and then the present value.
Future value:
FV= {A*[(1+i)^n-1]}/i
A= semi annual deposit= 2,000
i= 0.04
n= 2*4= 8
FV= {2,000*[(1.04^8)-1]}/ 0.04= $18,428.45
We calculate the present value:
PV= FV/(1+i)^n
PV= 18,428.45/ (1.04^8)= $13,465.49
