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1212The bond equivalent yield rate on the par bond (Z) is 6% or a 3% semiannual rate. The equivalent quarterly rate, . Security X makes 20 quarterly payments of 15 and 20 quarterly payments of 20. We need to use the cash flow function as follows: CFQ - 0; CFj = 15; Fj = 20; CF9 = 20; CF3 = 1,020;
F3 = 1; I = 1.4889; CPT -> NPV = 1,067.27. Note that CF3 contains the final quarterly payment of 20 along with the 1,000 face value payment.