Name BA332 Activity 15 Team Learning Bond Basics 1. 2. A 3 year bond was issued 1 year ago. Its par is $ 1000. The amount paid by each investor who participated in the purchase during the issue is. The coupon of the 3 year bond discussed above is 5%. Therefore, each year an investor gets $ in coupon. An investor will receive S. 3. per year in coupon and S. at maturity. 4. Cash flows of the bond are: 1-0 Cash flow Present value at 5% 5. 6. 0 1 2 3 not considered in present value calculation Now you are at t-1. If the current interest rate at t-1 is 5.5%, calculate the present value. Also calculate the present value at 5% 1-1 2 3 Cash flow Present value at Present value at 5.5% 5% Total We can conclude that as interest rate increases, present value (price) of a bond