We follow on from the last example and repeat our earlier calculation with semiannual interest payments of £5 discounted at a six-monthly required rate of return of 6 per cent (half of the 12 per cent required return by the investors). The theoretical market value now becomes:

The increase in theoretical market value occurs because half of each year’s interest payment is received sooner and therefore it has a higher present value.  

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Po = 5 5 (1.06)² (1.06)² + + 5 100 (1.06)8 (1.12)4 + = £94.60