Five years ago you purchased an 8% coupon bond for $975. Today you sold the bond for
Question:
a. All coupons were immediately spent when received.
b. All coupons were reinvested in your bank account, which pays 1% interest until the bond is sold.
c. All coupons were reinvested at 8.64% until the bond is sold.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
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a Annual coupon 08 1000 80 Total coupons received after 5 years 5 80 400 Total cash flows after ...View the full answer
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
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