$$\begin{array} { l llllll }
0 & 1 & 2 & 3 && 59 & 60 \
+ \cdots &+ \ldots &+ \ldots &+ \cdots & \ldots & \ldots + \ldots &+\
&\$62.50&\$62.50&\$62.50&&\$62.50&\$62.50+\$5,000
\end{array}$$ A corporation issues a bond that generates the above cash flows. If the periods shown are 3 months, which of the following best describes that bond?

Question

$$\begin{array} { l llllll } 
0 & 1 & 2 & 3 && 59 & 60 \
+ \cdots &+  \ldots &+  \ldots &+ \cdots & \ldots & \ldots + \ldots &+\
&\$62.50&\$62.50&\$62.50&&\$62.50&\$62.50+\$5,000
\end{array}$$ A corporation issues a bond that generates the above cash flows. If the periods shown are 3 months, which of the following best describes that bond?

Quizplus · Accepted Answer

The bond pays $62.50 every 3 months, which is a quarterly payment. Over 60 periods of 3 months each, this totals 15 years. The $62.50 payment on a $5000 notional value corresponds to a 5% annual coupon rate paid quarterly.

A Corporation Issues a Bond That Generates the Above Cash