Calculate the par value of the eight-year bond

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Reference no: EM131078212

An insurance company owns a 1,000 par value 10% bond with semiannual coupons. The bond will mature for 1,000 at the end of 10 years. The company decides that an 8-year bond would be preferable. Current yield rates are 7% compounded semiannually. The company uses the proceeds from the sale of the 10% bond to purchase a 6% bond with semiannual coupons, maturing at par at the end of 8 years. Calculate the par value of the 8-year bond.

Reference no: EM131078212

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