Given a bond with semiannual interest payments of \$300 and a lump sum principal payment of \$5,000 at maturity, how would you categorize these cash flows?

• A. Interest payments are an annuity; principal payment is a lump sum.
• B. Interest payments are a lump sum; principal payment is an annuity.
• C. Both interest and principal payments are lump sums.
• D. Both interest and principal payments are annuities.

Answer: (A)