ECON-3076EL Lecture Notes - Lecture 10: Chage And Aska, Scion Tc, Reaction Rate Constant
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Amount & timing of cash flows differ. Assume: no uncertainty about future cash flows and no risk of default. Lender provides borrower with an amount of funds (lv) now. The loan is repaid by making an equal fixed payment (fp= interest+ a part of the principal) each period until the debt is fully paid off (amortized) in n yrs. N = maturity = total number of periods in which the mortgage is fully amortized (paid off) 3. coupon bond: a coupon bond promises to pay the bond owner a fixed coupon interest payment (c) every period until the maturity date (n) when the face value (fv) written on the face of the bond is repaid. P = price of the coupon bond now. C = fixed coupon interest payment each period. Fv = face value written on the face of the bond. N = maturity: no of periods in which the debt is paid off.