Hey guys! I have an enquiry wrt deferred coupon payments! I have tried a question before and it stated that for the first 2 years, the bond will not be paying any coupons and thereafter, pay coupons until the end of maturity where t=6. So will the first 2 coupon payment be paid together with the principal payment or do we just ignore?
No you just ignore the first 2 years. But remember find the present value of coupon and princiapl for t=1 and discount it again once to get the PV. Basically this bond just pays 4 coupons and the principal.