Can someone explain the rationale behind discounting the obligation for only period?
ex: June 2021 SEK 5,250,000 obligation can be funded with a 4 year 5.5% coupon bond with par value 4,980,000 (5,250,000/1.0550)
why is the par value 4,980,000?
The last payment on a coupon bond is the par value plus the last coupon payment.
You’re not discounting it; you’re accounting for the coupon payment.
thank you!
You’re quite welcome.
I don’t get it though. 5,250,000/1.055 should be 4,976,303.32, not 4,980,000, right?
You can’t buy a fraction of a bond.