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CFA Level 1
Fixed Income

Present Value of Bond's Cash Flows

Very Easy Fixed Income Valuation Discounted Cash Flow

Consider a bond that pays a coupon of $100 annually and has a maturity of 3 years. The bond is priced at $950 today. To evaluate whether this bond is a good investment, you will need to determine its present value based on the future cash flows it generates. The future cash flows consist of the annual coupon payments and the principal repayment at maturity. In this context, calculate the present value of the cash flows to find out if it reflects a good investment opportunity.

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