Question

Draw The Cash Flow Diagram

Draw The Cash Flow Diagram

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Answer #1

coupon rate is 8% paid semi annually.

T is time

T 0

Sale of Bond $10000 ( Cash Inflow)

After 6 months T 0.5

10000x (8/100)x (6/12) = $400 (Cash Outflow)

T 1

$400 (Cash Outflow)

T1.5

$400 (Cash Outflow)

T2

$400 (Cash Outflow)

T2.5

$400 (Cash Outflow)

T3

$400 (Cash Outflow)

T3.5

$400 (Cash Outflow)

T4

$400 (Cash Outflow)

T4

The company will redeem the bond at the redemption value (Cash Outflow)

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