Consider an annual coupon bond with a face value of $100, 7 years to maturity, a
ID: 2761828 • Letter: C
Question
Consider an annual coupon bond with a face value of $100, 7 years to maturity, and a price of $83. The coupon rate on the bond is 9%. If you can reinvest coupons at a rate of 4.5% per annum, then how much money do you have if you hold the bond to maturity ? Consider an annual coupon bond with a face value of $100, 7 years to maturity, and a price of $83. The coupon rate on the bond is 9%. If you can reinvest coupons at a rate of 4.5% per annum, then how much money do you have if you hold the bond to maturity ?Explanation / Answer
Year Interest CVF@4.5% compounded value of coupons 1 9 1.30226 11.72034 2 9 1.246182 11.21564 3 9 1.192519 10.73267 4 9 1.141166 10.2705 5 9 1.092025 9.828225 6 9 1.045 9.405 7 9 1 9 amount of coupons at maturity 72.17237