The price of a coupon bond is determined by taking the present value of:
A) the bond's final payment and subtracting the coupon payments.
B) the coupon payments and adding this to the face value.
C) the bond's final payment.
D) all of the bond's payments.

Question

Quizplus · Accepted Answer

The price of a coupon bond is determined by taking the present value of all the bond's payments, which include the coupon payments and the bond's final payment. This is because the coupon payments and the final payment are both a part of the cash flows that the bondholder will receive. Therefore, the best choice is D, which includes all of the bond's payments in the calculation of the bond's price.

The Price of a Coupon Bond Is Determined by Taking