What is the expected last cash flow of a 10-year bond that pays coupon interest semiannually, has a coupon rate of 7%, and has a par value of $100,000?

(Round answer to 2 decimals)

Question

What is the expected last cash flow of a 10-year bond that pays coupon interest semiannually, has a coupon rate of 7%, and has a par value of $100,000?

(Round answer to 2 decimals)

BlackTom AI · Accepted Answer

Let’s parse the problem carefully and lay out the cash flows step by step.
First, identify the bond's coupon structure: a 7% annual coupon rate on a par value of $100,000, paid semiannually. This means the annual coupon amount is 0.07 × 100,000 = 7,000, and since payments are twice a year, each semiannual coupon is 7,000 / 2 = 3,500.
Second, determine the number of coupon payments: a 10-year bond with semiannual coupons results in 10 × 2 = 20 semiannual periods. Thus, there are 20 coupon payments of $3,500 each.
Third, consider the final cash flow at maturity. At the end of the 10-year term, the bondholder receives the last coupon payment plus the redemption of the par value. The final coupon is $3,500 and the redemption amount is $100,000.
Therefore, the last cash flow equals the final coupon plus redemption: 3,500 + 100,000 = 103,500.
As a cross-check, you can summarize the cash flow pattern: each of the first 19 periods contributes 3,500, and the 20th period contributes 3,500 plus 100,000, totaling 103,500 for that final period.
In summary, the calculation hinges on (a) translating the coupon rate into a per-period payment, (b) counting periods for a 10-year semiannual schedule, and (c) adding the redemption at maturity to the final coupon payment.

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What is the expected last cash flow of a 10-year bond that pays coupon interest semiannually, has a coupon rate of 7%, and has a par value of $100,000? (Round answer to 2 decimals)

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