Question

scenario 1: a bond with a $7,000 face value matures in 6 years and has a coupon rate of 4%, paid semi - annually. create the payout table. double - click the light blue cells to edit them. day 1 $7,000.00 0.5 year 1.0 year 1.5 year 2.0 year 2.5 year 3.0 year 3.5 year 4.0 year 4.5 year 5.0 year 5.5 year

Explanation:

Step1: Calculate semi - annual coupon payment

The formula for the semi - annual coupon payment \(C\) is \(C=\frac{\text{Coupon Rate}\times\text{Face Value}}{2}\).
Given the face value \(F = 7000\) and the coupon rate \(r=4\%=0.04\).

$$C=\frac{0.04\times7000}{2}$$

$$C = 140$$

Answer:

The value for the \(0.5\) - year cell (and all other non - maturity cells) is \(\$140.00\). At maturity (6 years), the payment will be \(\$7000 + \$140=\$7140\) (assuming the last coupon is paid at maturity). So the payout table will have \(\$140\) for each 6 - month period until the 6 - year mark, and \(\$7140\) at the 6 - year mark. If we just consider the first cell (\(0.5\) year), the answer is \(\$140.00\)