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A bond has a coupon rate of 8% and matures in 10 years. What are its expected cash flows if this bonds have a principal amount of $1000 and pay interest semi-annually

User Shahid Ahmad
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1 Answer

20 votes
20 votes

Answer:

$1080

Step-by-step explanation:

Calculation to determine the expected cash flows

Since the bonds have a principal amount of the amount of $1000 first step is to calculate the Cash flow CO1

CO1=$1000(.08)/2

CO1=$80/2

CO1= $40

Second step is to calculate the Frequency of PMT

Frequency of PMT= 10 years x 2 (semi-anually)

Frequency of PMT= 20

Now let determine the Cash Flow CO10

Cash Flow CO10=1000+80

Cash Flow CO10=$1080

Therefore the expected cash flows is $1080

User Bogdansrc
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