An n-year bond with semiannual coupons has the following characteristics: The par value and redemption value are 2,500; The annual coupon rate is 7% payable semi-annually; The annual nominal yield to maturity is 8% convertible semiannually; and The book value immediately after the fourth coupon is 8.44 greater than the book value immediately after the third coupon. Calculate n.

The size of the payment = $628.63

Explanation:

An annuity is a series of equal payment or receipt occurring for certain number of period.

The payment in question is an example of an annuity . We can work back the size of the payment using the present value of the ordinary annuity formula stated below

The Present Value of annuity = A × (1- (1+r)^(-n))/r

A- periodic cash flow,= ? r- monthly  rate of interest - 4.25%/12= 0.354%  

n- number of period- (71/4×12)= 87.

Let y represent the size of the payment, so we have

47,000 = y × ( 1-1.00354^(-87))/0.00354

47,000 = y× 74.76

y =47,000/74.7656= 628.63

The size of the payment = $628.63