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17 Cards in this Set
- Front
- Back
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Issuer
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Borrower
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Bond Holder
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Lender
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Perpetuity
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Bond with no maturity
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Coupon
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Interest rate that the borrower pays to the lender
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Par Value
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Face value, future value
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Coupon Rate
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amount of interest paid per year, expressed as a percentage of the face value of the bond. interest rate a bond issuer will pay to the bond holder
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With bonds, yield to maturity is typed into the calculator as
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1/YR
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Zero-Coupon Bond aka Discount Bond
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bond bought at lower than face value, face value repaid at time of maturity
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Examples of zero-coupon bonds
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US treasury bills, US savings bonds
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Interest Rate RIsk
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Risk arising from changes in interest rate changes, which depends upon how sensitive its price is to changes in market interest rates.
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Which has a higher price risk? low coupon or high coupon rate bonds
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Low coupon rate bonds
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If you thought interest rates were going to rise, what type of bodn would you want?
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short term
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Current Yield =
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annual coupon/price
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Annuity
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any term of fixed payments over a period of time that eventually ends
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Perpetuity
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fixed payments forever
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Discount Bond
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sells for less than its face value because interest rate rose
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Premium Bond
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interest rates drop, bond would sell for more than par
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