Hello Volunter,

From where did I get the $1,025.03 figure?

It is the sum of the par value of the bond, 1,000, plus the capital gains achieved when interest rates fall to -5.0%, or 25.03. The calculation makes use of Microsoft Excel's "PV" function. Here are the inputs:

* rate = annual interest rate (-5.0%) divided by number of payments per year (2)

* nper = number of total payments for the life of the bond (4) - how many periods in the future you wish to run your scenario (3)

* pmt = the value of one payment for the bond (-0.60)

* fv = the par value of the bond (1,000)

* type = 0 (interest payments are made at the end of the period, not at the beginning

I hope that helps.

With smiles,

Jason