Consider a two-year coupon bond that has a present value of $10,000.If the annual rate of discount is 3 percent, and the payment made at the end of each year is $250, the principal amount to be repaid at the end of two years is

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The present value of the bond is the sum of the present values of the two payments and the principal amount. The present value of each payment is $250/(1.03)^1 = $242.72. The present value of the principal amount is $10,000/(1.03)^2 = $9,415.25. Therefore, the principal amount is $10,000 - $242.72 - $9,415.25 = $342.03.

Consider a Two-Year Coupon Bond That Has a Present Value