bus 351 - ch 7 interest rates and bond valuation

mon, sept 29

a bond is ___________ debt security.

long term

what do bonds obligate the issuer do?

makes them have usual fixed interest payments to the bond holder during the life of the bond

N

number of periods

t or T

periods

M (FV)

face value or par value or principal: $1000 payment to the bondholder a maturity of the bond

INT (PMT)

interest payments or coupon paymentsr

r_d %

fixed interest rate or coupon rate; annual interest payment as a percent of par value

YTM (Rate)

yield to maturity (YTM), required market rate, required rate of return, or discount rate that makes the discounted cash flows from a bond equal to the bond’s current market price. YTM assumes that you hold the bond to maturityPV

PV

present value, price today. the current value of a bond is the market price