Understanding discount factor

[BHeng9611]

Hi all,

Refer to the attached, I have a question to ask. Based on the previous slide which states PV = FV x Discount factor. If I apply it on the highlighted portion, PV will be $100.55, FV will be ($100 + $100 x (0.625/100)). May I know why is FV using $100 as the principal amount? Shouldnt the principal amount be $100.55 as PV (AKA principal amount) is $100.55?

Seek your kind assistance on this issue.

Thank you,
BX

 

[gsarm1987]

Hi all,

Refer to the attached, I have a question to ask. Based on the previous slide which states PV = FV x Discount factor. If I apply it on the highlighted portion, PV will be $100.55, FV will be ($100 + $100 x (0.625/100)). May I know why is FV using $100 as the principal amount? Shouldnt the principal amount be $100.55 as PV (AKA principal amount) is $100.55?

Seek your kind assistance on this issue.

Thank you,
BX

its in context of principle amount plus the coupon. FV inst the same as future value here. its just the principle part. what you are asking to be principle amt (100.55) is actally pv of the FV plus the final coupon.