Question

D Question 22 1 pts Facebook issued its first bond on 1/1/20X1. The bond has $1,000 face value, a 4% coupon rate, and it matures on 1/1/20X9. Today, 1/2/20X7, the bond is trading at $1,050 per bond. Which table best represents the remaining contractual Cash Flows for this bond? Cash Flow $40 Date 1/1/20x8 1/1/20X9 1/1/20x9 $1,040 Date 7/1/20X7 1/1/20X8 7/1/20X8 1/1/20X9 1/1/20x9 Cash Flow $20 $20 $20 $20 $1,000 Date 1/1/20X8 1/1/20x9 1/1/20x9 Cash Flow $40 $40 $1,000 Cash Flow $40 $40 O Date 7/1/20X7 1/1/20x8 7/1/20X8 1/1/20X9 1/1/20x9 $40 $40

Answer 1

Ans- Option C.

Coupon payment = $1000*4% = $40. Coupon payment are made annually and last payment must be made on 1/1/20X7. So, remaining will be paid on 1/1/20X8 & 1/1/20X9.

Bonds are redeem on Par/Face value ($1000) unless otherwise provided.

Hence, 2 cash flows of $ 40 on 1/1/20X8 & 1/1/20X9. And a Final on 1/1/20X9 of $ 1000

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