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  3. Bond Valuation and Analysis in R

Exercise

Laying out the bond's cash flows

In the next set of exercises, you'll build a cash flow data frame as seen in the previous video.

Suppose you are considering investing in a bond that has a $100 par value, 5% coupon rate, and 5 years to maturity. The coupon rate is the interest that you earn from holding the bond, so prior to the bond's maturity you would receive $5 of coupon payments each year. At maturity, you will also receive the $100 par value back.

In this exercise, you will create a vector cf that lays out this bond's cash flows. You will then convert this vector into a data frame, so you can add additional columns of data required in subsequent analyses.

Instructions

100 XP
  • Create vector cf that contains the bond's cash flows. Remember that cash flows are $5 for the first 4 years and $105 in the 5th year.
  • Use data.frame() to convert cf into a data frame.