Question

1. Peter purchased a seven-year $600 bond at par value with a 5% coupon. What is the total value of the coupons?

Answer 1

What ARE the coupons?

$600
5%
Semi-Annual

What do YOU get?

Answer 2

i realy dont know. i dont get any of this.

Answer 3

Then you are toast. That's just not good at all. Have you been attending class and reading your course materials?

$600 at par means two things.

1) Purchased at $600.00
2) It will be worth $600 at the end.

5% Coupon means one thing.

3) $600.00 * 0.05 / 2 = $15.00 will be paid every 1/2 year until maturity.

This thing runs for 7 years. Can you set up a cash flow diagramme for the seven years, showing each half year from purchase?