A “buy-and-hold” investor purchases a 10-year, 8% annual coupon payment bond at 85.503075 per 100 of par value and holds it until maturity. The investor receives the series of 10 coupon payments of 8 (per 100 of par value) for a total of 80, plus the redemption of principal (100) at maturity. In addition to collecting the coupon interest and the principal, the investor may reinvest the cash flows. If the coupon payments are reinvested at 10.40%, the future value of the coupons on the bond’s maturity date is 129.970678 per 100 of par value.

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[8 × (1.1040)] [8x (1.1040)5] [8 x (1.1040)¹] + [8×(1.1040)³] + [8 × (1.1040)7] + [8 × (1.1040)6] + + [8x (1.1040)4] + [8x (1.1040)³] + [8 × (1.1040)²] + + 8 = 129.970678