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sir, for example,
3yr semi-annual Bond Face value = 5m
nominal rate = 10%
market rate = 12%It appears I cant use discount method like this
250000/1.12^0.5 + 250000/1.12^1 + 250000/1.12^1.5 …
But i have to do like this
250000/1.06^1 + 250000/1.06^2 + 250000/1.06^3 …
why cant i use the above method? i see it is not wrong.
I saw this TA and learned that 6 months can be discounted using ^0.5
But sir, n=number of periods and if i use 0.5 method for bond calculation, it is wrong. I would like to know why we cant use 0.5 method to find issue price of bond, when it seems very acceptable for me.
Does this mean that, since n = number of periods, the discount rate for 6months in Technical article above should be as (1/1.06^1)?
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