Period 0 1 $26.0 2 $26.0 3 $26.0 19 $26.0 20 $26.0+$1 A corporation issues a bond that generates the above cash flows. If the periods shown are 6 months, which of the following best describes that bond? O a 10-year bond with a notional value of $1,000 and a coupon rate of 5.2% paid semiannually. O a 20-year bond with a notional value of $1,000 and a coupon rate of 5.2% paid quarterly O a 7-year bond with a notional value of $1,000 and a coupon rate of 2.600% paid monthly. O a 10-year bond with a notional value of $1,000 and a coupon rate of 1.300% paid annually.
Period 0 1 $26.0 2 $26.0 3 $26.0 19 $26.0 20 $26.0+$1 A corporation issues a bond that generates the above cash flows. If the periods shown are 6 months, which of the following best describes that bond? O a 10-year bond with a notional value of $1,000 and a coupon rate of 5.2% paid semiannually. O a 20-year bond with a notional value of $1,000 and a coupon rate of 5.2% paid quarterly O a 7-year bond with a notional value of $1,000 and a coupon rate of 2.600% paid monthly. O a 10-year bond with a notional value of $1,000 and a coupon rate of 1.300% paid annually.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A corporation issues a bond that generates the above cash flows. If the periods shown are 6 months, which of the following best describes that bond?
- 10-year bond with a notional value of $1,000 and a coupon rate of 5.2% paid semiannually.
- 20-year bond with a notional value of $1,000 and a coupon rate of 5.2% paid quarterly.
- 7-year bond with a notional value of $1,000 and a coupon rate of 2.600% paid monthly.
- 10-year bond with a notional value of $1,000 and a coupon rate of 1.300% paid annually.
### Diagram Explanation
The timeline at the top of the image represents the cash flows of the bond across different periods. Each period is 6 months long:
- Period 0: Starts with $0
- Period 1 to 19: Consistent cash flow of $26 each
- Period 20: Cash flow of $26 plus an additional $1.
This suggests regular coupon payments, ending with a final payment that includes the principal amount.
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