What is the cash flow of a seven-year bond that pays no coupon interest and has a par value of $10,000?

What will be an ideal response?

There is no periodic cash flow as found in the previous problem. Thus, the only cash flow will be the principal payment of $10,000 paid by the issuer (and received by the bond purchaser) at the end of seven years. This type of cash flow with no periodic payment resembles a zero-coupon bond. For a zero-coupon bond, the holder realizes interest at maturity after buying the bond substantially below its principal value. The exact amount of interest received at maturity date by the holder is the difference between the principal value and the price initially paid.