CFA Practice Question

There are 490 practice questions for this study session.

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 ______.

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.
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