Consider a 35 year coupon bond with a face value of $1,000 that pays $80 annual coupons (beginning one year from today).Assume that you invest each coupon in a bank that pays 8% interest.On the maturity date,how much money do you have (in total)from the bond?

Question

Quizplus · Accepted Answer

Step 1 - Calculate the future value of the coupon payments.
FV = C × 11ea7fdb_fbff_eba4_a768_077837a8875e_TB2902_11 FV = 80 × 11ea7fdb_fbff_eba5_a768_17ac4add7636_TB2902_11 = $13,785.34
Using a financial calculator:
N = 35, I/Y = 8 PV = 0, PMT = -80, cpt FV = $13,785.34
Step 2 - Calculate how much interest is earned on the coupons.
13,785.34 - (35 × 80) = $10,985.34
Step 3 - Sum all of the funds from owning the bond.
1,000 + 13,785.34 = $14,785.34

Consider a 35 Year Coupon Bond with a Face Value