On 18 October 2017, a 5% Treasury Bond maturing 18 October 2020 with €200 nominal was purchased at €206.50. Assuming no sale before maturity, the total amount received by maturity including all coupons and principal will be

• A. €200.00
• B. €206.50
• C. €230.00
• D. €216.00

Answer: (C)

The total amount you receive by maturity comes from two parts: the coupon payments you get during the life of the bond and the repayment of the face value at maturity. A 5% coupon on a €200 par means €10 per year in coupons (whether paid annually or semi-annually, the total each year is €10). Over three years (from 18 Oct 2017 to 18 Oct 2020) you collect €10 × 3 = €30 in coupons. At maturity you also get the €200 face value back. So the total cash received if you hold to maturity is €30 + €200 = €230. The purchase price (€206.50) affects your yield but not the nominal total received at maturity.