Studied by 0 people
Looks like no one added any tags here yet for you.
Bonds
Are debt securities issued by a corporation or government entity to borrow money from the public on a long term basis
Coupon rate
The annual coupon divided by the face value of a bond
Yield to maturity
The interest rate required in the market on a bond
Discount bonds
A bond that sells for less than face value
Face value (par value)
The principal amount of a bond that is repaid at the end of the term
Premium bond
A bond that sells for more than face value
Current yield
A bonds annual coupon divided by its price
Coupon
The states interest payment made on a bond
Maturity
The specifies date on which the principal amount of a bond is paid
US Treasury Securities Bond
Have no default risk
Exemption from just state income taxes
Municipal securities bond
Have varying degrees of default risk
Almost always callable
Exempt for just federal income taxes
Zero coupon bond (just zeros)
Makes no coupon payments and is thus initially priced at a deep discount.
Interest Rate Risk
Fluctuating interest rates
the longer the time to maturity the greater the interest risk
The lower the coupon rate the larger the risk
Long term debt
Promises made by the issuer to pay principal when due and make timely interest payments on the unpaid balance
long term when more than a year
Bond markets
The trading volume in bonds on a typical day is many, many times larger than the trading volume in stocks
Dividends
Paid to shareholders represent a return on the capital contributed to the corporation by shareholders
