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What are all the adjuctments I need to make when I am calculating a semi annual bond?



Asked by Lucy, Last updated: Jun 25, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

There are several adjustments to make to account for semi-annual rather than annual payments:-divide the discount rate by 2-divide the coupon payment by 2-increase the number of payment periods by a factor of 2all three of these adjustments must be made in order to calculate the semi-annual price of a bond.the text reads: in our examples, we will use a discount rate of 5%, (the coupon rate of 10% divided by 2) to reflect twice-yearly interest payments. this is incorrect since the semi-annual discount rate of 5% comes from dividing the annual discount rate of 10% by 2. youll notice throughout the calculation the discount rate applied is 0.05.
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