Assuming that the Mills Company bond pays interest semiannually and that the required stated annual...

Assuming that the Mills Company bond pays interest semiannually and that the required stated annual return, k_d, is 12% for similar-risk bonds that also pay semiannual interest, substituting these values into Equation 6.8a yields

Table Use

Calculator Use In using a calculator to find bond value when interest is paid semiannually, we must double the number of periods and divide both the required stated annual return and the annual interest by 2. For the Mills Company bond, we would use 20 periods (2 x 10 years), a required return of 6% (12% ÷ 2), and an interest payment of $50 ($100 ÷ 2). Using these inputs, you should find the bond value with semiannual interest to be $885.30, as shown at the left. Note that this value is more precise than the value calculated using the rounded financial-table factors.