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Question
Briefly explain the cash flows associated with a bond to the investor.
Bonds provide two types of cash flows: interest payments and the principal payment. Interest payments occur each period, usually annually or semi-annually. Periodic interest payments are also called coupon payments. Thus this forms an annuity. Principal payment occurs at the time of maturity of the bond and is a lump sum payment.
Type: Easy
Answer
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Related questions
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Suppose VS's stock price is currently $20. In the next six months it will either fall to $10 or rise to $30. What is the current value of a put option with an exercise price of $15? The six-month risk-free interest rate is 5% (periodic rate).
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