Task 21:

A plain vanilla bond has a par value of 10,000 and a coupon rate of 0.5%. The bond has a maturity of 5 years. Coupon payments are made semi-annually.

Complete the information regarding the bond's cash flows:

1) The periodic interest payments (coupon payments) are made by the:

1.Issuer

2.Investor

3.Lender

4.Bondholder

2) The periodic interest payment is:

1.25, paid twice a year

2.50, paid once a year

3.50, paid twice a year

3) In total, the borrower promises to make:

1.Ten coupon payments of 25 and a principal repayment of 10,025 at maturity.

2.Ten coupon payments of 25 and a principal repayment of 10,000 at maturity.

3.Five coupon payments of 50 and a principal repayment of 10,050 at maturity.

4.Five coupon payments of 50 and a principal repayment of 10,000 at maturity.

4) If the current market price of the bond is 10,015, the bond is trading at a:

1.Par

2.Premium

3.Discount