Let us assume that \(F=\$ 10000, T=5\), measured in years, and semiannual coupons are paid, with rate \(c=4 \%\). Note that coupon rates, like all interest rates, are always quoted annually, but should be adjusted to the actual period they refer to. In this case, since frequency is semiannual, the actual coupon rate is \(2 \%\) for six months. This means that along the bond life there will be ten cash flows to the bondholder. At times \(t=k \quad 05, k=12 \quad 9\), measured in years, the cash flow will be

\[\frac{c}{2} \quad F=\$ 200\]

whereas the final cash flow at \(T=5\) includes both the last coupon and the face value, amounting to \(\$ 10200\).