bond question

[hcc221]

an 8.5% coupon rate government bond has a maturity date of oct. 2000 and a market determined (annual) yield to maturity of 5.60%. That bond has a face value of $1000 and makes interest payments every six months (the next is in 6 months). For this problem, assume the bond matures in precisely 7 years. what should be the price quote for this bond?


please tell me the steps to solve this/

 

[Denis]

Present value of $1000 + present value of 14 semiannual payments of $42.50;
rate used to be the equivalent of effective 5.6% annual, thus (1+i)^2 - 1 = .056 ; kapish?

 

[hcc221]

Prevent value of $1000 + present value of 14 semiannual payments of $42.50;
rate used to be the equivalent of effective 5.6% annual, thus (1+i)^2 - 1 = .056 ; kapish?

can you simplify what you said to more details / steps ? I'm a bit confused on this one. what would be the interest rate if i was to find the PV of 1000 and PV of "14 semiannual payments of $42.5"

 

[Denis]

(1+i)^2 - 1 = .056
(1+i)^2 = 1.056
1+i = 1.056^(1/2)
1+i = 1.0276186...
i = .0276186.. ; or ~2.76%