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Basic Question 4 of 18
The promised cash flows for an annual-pay deferred coupon bond with three-year deferral period, 10 years to maturity, 8% coupon rate and $1,000 par value are ______.
B. $80 for years one-three; $259.71 year four; $0 years five-nine; $1,000 year ten
C. $0 for years one-two; $259.71 year three; $80 years four-nine; $1,080 year ten
A. $0 for years one-three; $80 years four-nine; $1,080 year ten
B. $80 for years one-three; $259.71 year four; $0 years five-nine; $1,000 year ten
C. $0 for years one-two; $259.71 year three; $80 years four-nine; $1,080 year ten
User Contributed Comments 11
| User | Comment |
|---|---|
| lijia1 | 3 year deferral period means accrued interest will be paid at the end od year 3? I feel it should be paid in the 4th year..... |
| nija | It should be paid at the end of the third year. |
| bobert | If it was paid at the end of year 4, then it would be deferred for 4 years. Don't overthink it to much. |
| ljamieson | 80*1.08^2+80*1.08+80=259.71 |
| cong | The accured coupons are payable at the end of the deferred period (ie end of year 3). |
| Bobokoko | what do you enter into calculator?? |
| CFALucille | 3 N 8 I/Y 80 PMT CPT FV |
| slipleft | a good formula to know: [((1+r)^t -1)/r]*payment [(1.08^3 - 1)/.08]*80 |
| quanttrader | Why would the accrued payment not be just be 3*80 = $240. Coupon is 8% on 1000 so $80, where does it mention that the $80 is being reinvested at a mkt rate of 8%? |
| narenk | 8% Coupon Rate applies to all Cash Flows generated. |
| jonan203 | quanttrader: since the bond interest is deferred the firm must pay interest on coupon payments that have not been paid to the bond holders. |
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Learning Outcome Statements
describe common cash flow structures of fixed-income instruments
CFA® 2025 Level I Curriculum, Volume 4, Module 2.