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ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The...

ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The face value is $1,000 per bond. What are the expected cash flows from one of these bonds?

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Expert Solution

Given about ABC Co.'s Bond,

Face value = $1000

Coupon rate = 6%

bond matures in 10 years.

So, Bonds cash flows include yearly Coupon payment and Face value payment at the maturity.

So, for this bond, yearly coupon payment = 6% of 1000 = $60

and at maturity, cash flow = coupon + face value = 60+1000 = $1060

Hence bond will pay $60 starting year 1 end to year 9 end and will pay $1060 at the end of year 10 i.e. at maturity.

jeff jeffy answered 2 years ago
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