ECON 2560 Chapter Notes - Chapter 6: Accrued Interest, Cash Flow, Opportunity Cost
14 Feb 2018
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Bonds: long term loans sold by companies to investors. Companies promise to make a series of fixed interest payments and then to repay the debt. Higher risk= higher rate of return to compensate. Federal, provincial/ state, and local government also raise money by selling bonds. Bonds: securities that obligate the issuers to amk specified payments to the bondholder. Coupon: the interest payment paid to the bondholder. Face value: payments at the turn to of the bond. Also called principal, par value, or maturity value. Coupon rate: annual interest payments as a percentage of face value. Example: in march 2013, canadian federal government auctioned off . 2 billions of 1. 25% coupon bonds maturing march 1,2018, and paying semi-annually. Each bond has a face value of ,000. r= 1. 25% Semi annual payments= . 50/2= . 25 semi- annual instalments. The first interest payment of . 25 was paid on september 1, 2008, and the next one on march.
