SOA 5/95 #15

Two 1000 par value bonds are purchased. The 2n-year bond costs 250 more than the n-year bond. Each has 13% annual coupons and each is purchased to yield 6.5% annual effective. Calculate the price of the n-year bond.



The solution says

Price of 2n-year bond: 130 (a angle 2n) + 1000*v^2n

Price of n-year bond: 130 (a angle n) + 1000*v^n



From what I know, price of a bond is PV of coupons + PV of redemption price.



How did they get redemption prices of 1000 here?



Thanks

SOA 5/95 #15