Consider a $1,000 face value default free government bond.  Suppose
that the bond has an 8% coupon and 13 years to maturity.  Finally,
suppose that the interest rate on similar bonds is 4%.  This 4% is the
APR, given semi annual compounding.

What should be the price of the bond?

Howdy missmallprincess-ga,

We can use an online calculator to find the price of the bond, such as
the one provided on the Prentice-Hall web site.
http://www.prenhall.com/divisions/bp/app/cfldemo/BV/BondPrice.html

"The price or value of a bond is determined by discounting the bond's
expected cash flows to the present using the appropriate discount rate."

In addition to the online calculator, they also have the formula to do
calculation, as well as step-by-step instructions on how to do this on
a Texas Instruments BA II Plus calculator.

Plugging in the numbers that you supplied, the calculator gives us a
price for the bond in question of $1402.42.

If you need any clarification, feel free to ask.


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Google search on: bond calculator
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