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Examples of cash ow
Bond or xed income securities: The owner gets back a regular
xed payment (coupon). At the end of the term, the owner get
back the capital invested (principle).
For example, a 10 year bond with principle 100 and annual coupon
rate 2% gi
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SEVERAL EXAMPLES ON ANNUITY
1. [2010 paper question 6] The deterministic force of interest at time t is
given by
0.01 t 5
(t) =
.
0.03 t > 5
Find the present value of a 10 year continuous annuity that pays 1 per
annum during the rst 3 years and 2 per annu