7.27.2005

Q&A: What is the total cash flows received...

... if an investor purchases a 3-year, 8% coupon bond that has a 10% YTM, assuming the semi-annual bond is held to maturity?

Total cash flow = FV of total Interest Payments + Capital gain = $272.08 + $50.76 = $322.84

  • FV of total Interest Payments: using Excel's Rate function with Nper = 3*2, Rate = 10%/2, PMT = 1000*(8/2)%, one gets FV = $272.08
  • Capital gain = Par - PV = 1000 - $949.24 = $50.76
    • using Excel's PV function with Nper = 3*2, Rate = 10%/2, PMT = 1000*(8/2)%, FV =1000, one gets PV = $949.24

Category: C++ Quant > Debt > Valuation

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