1. The problem asks whether, when evaluating the present value (PV) of coupons and redemption value for bonds with coupons paid half-yearly, we should use the half-yearly interest rate on the redemption value as well. 2. The formula for the present value of a bond with coupons paid half-yearly is: $$PV = \sum_{t=1}^{2n} \frac{C/2}{(1 + r/2)^t} + \frac{F}{(1 + r/2)^{2n}}$$ where: - $C$ is the annual coupon payment, - $r$ is the annual interest rate (yield), - $n$ is the number of years to maturity, - $F$ is the face (redemption) value of the bond, - Coupons are paid every half year, so there are $2n$ periods. 3. Important rule: Since coupons are paid semi-annually, the interest rate must be adjusted to a half-yearly rate by dividing the annual rate by 2. 4. The redemption value $F$ is paid at the end of the bond's life, which is after $2n$ half-year periods. 5. Therefore, the redemption value must also be discounted using the half-yearly interest rate for $2n$ periods, i.e., using $(1 + r/2)^{2n}$ in the denominator. 6. In plain language: Because the bond pays coupons twice a year, the interest rate and the number of periods are adjusted accordingly for both coupons and redemption value. So yes, the half-yearly interest rate is used to discount the redemption value as well. Final answer: Use the half-yearly interest rate to discount both the coupons and the redemption value when coupons are paid half-yearly.