Depict and explain the cash flow of a bond that has a fixed coupon rate and gives an annual stream of returns.

Depict and explain the cash flow of a bond that has a fixed coupon rate and gives an annual stream of returns. 

Ans. The cash flow for fixed coupon rate bond is equal to: 

where, V is value in rupees; T is number of years; X is annual coupon payment; r is rate of return; M is maturity value t is the time period in which payment is received. It is normally a method adopted for calculating present value of future returns.