Consider a bond that promises the following cash flows. The required discount rate is 15%.Year01234Promised Payments 160170180230You plan to buy this bond, hold it for 3 years, and then sell the bond.What total cash will you receive from the bond after the 3 years? Assume that periodic cash flows are reinvested at 15%

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What total cash will you receive from the bond after the 3 years? Assume that periodic cash flows are reinvested at 15%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Consider a bond that promises the following cash flows. The required discount rate is 15%.

Year	0	1	2	3	4
Promised Payments		160	170	180	230

You plan to buy this bond, hold it for 3 years, and then sell the bond.

What total cash will you receive from the bond after the 3 years? Assume that periodic cash flows are reinvested at 15%

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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