solution

An n = 10 year bond is issued with quarterly coupons and a face (par) value of F = $6000. The coupon rate is a nominal annual rate of r = 6.5% compounded quarterly. The yield rate is a nominal annual effective rate of i = 5.1% compounded quarterly. The bond may be redeemed at maturity for a redemption value of C = $6010. Determine the amount of premium written down in the k=16th coupon payment. Hint: Use the formula P_k = ( F r – C i ) v^{m – k + 1} where m is the number of coupon payments. in this problem m = 4*n. Enter your answer to the nearest cent.