BU111 Study Guide - Final Guide: 18 Months, Paradigm Shift, General Agreement On Tariffs And Trade
19
BU111 Full Course Notes
Verified Note
19 documents
Document Summary
Represents debt for issuing corporation or government. Characteristics: legal, binding agreement, fixed rate of return (often paid semi-annually) Risk return tradeoff: higher risk you can expect a higher return; low risk you can expect a lower return: fixed term- principal repaid at maturity, priority over stockholders. Secured: is a specific asset that guarantees that debt will be repaid such as a mortgage (the bank can take the house) less risky. Unsecured: there isn"t a guarantee that debt will be repaid such as credit cards (the bank can get one specific asset: registered vs bearer. Bearer bond: is anonymous, ownership isn"t registered. You receive a series of coupon payments (these are interest payments for lending your money) = annuity. You receive a principal payment (one lump sum) upon maturity, i. e. you get back what you loaned to the borrower= single payment. Coupon rate + prevailing rates of interest.
