- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 42. Fixed-Income Securities: Defining Elements
- Subject 1. Basic Features of a Fixed-Income Security

###
**CFA Practice Question**

The cash flows promised to the owner of a $250,000 par value bond with five years to maturity, paying an 8% coupon rate in semi-annual payments, are ______.

B. 10 semi-annual payments of $20,000 plus one final payment of $150,000

C. 10 semi-annual payments of $10,000 plus one final payment of $250,000

A. five annual payments of $80 plus one final payment of $1,000

B. 10 semi-annual payments of $20,000 plus one final payment of $150,000

C. 10 semi-annual payments of $10,000 plus one final payment of $250,000

Correct Answer: C

There are 10 coupon payments: two per year for five years. Annual coupon interest is the product of the coupon rate and the par value. Each semi-annual coupon payment is one-half the annual interest due. The bond's final payment is the return of par value.

###
**User Contributed Comments**
5

User |
Comment |
---|---|

jmcgui10 |
Isn't the last payment $260,000? 10,000 + 250,000? |

NavdeepS |
The curriculum text states it slightly differently (but pretty similar) as 9 semiannual payments of 10k plus one final payment of 260K. Since thats not an option here, the correct answer is the most appropriate choice one. |

Skrills |
it is essentially the exact same thing! |

2014 |
Rite navdeep |

To-be-CFA |
You can solve this question without actually solving it as C is the only option having $250,000 as one final payment. |