Note: These two problems are answered based on the question below. I believe the interest payments are (A)$100 and i believe the cash flows based on interest is (A)132.88

Consider a bond paying a coupon rate of 10% per year, compounded annually. Assume that the market interest rate (YTM or return on investments of like risk) is 15% per year. In other words you want a 15% return on the bond. The bond has three years until maturity. The par value is $1,000. Assume that you buy the bond today for $885.84.

What are the interest payments that you will receive in yr 1, yr 2, and yr 3?

a. $100

b. $88.85

c. $85.84

d. $150

e. None of above

What are the cash flows (interest only) that you want to receive in yr 1, yr 2, and yr 3 (based on the 15% return)?

a. $132.88

b. $150

c. $88.58

d. $100

e. None of above