Actuarial Science 2053 Chapter Notes - Chapter 6: Canada Savings Bond, Soo Line Railroad
20 Jan 2016
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When a corporation or government needs a large sum of money for a long period of time, they can issue bonds: the bonds can be sold to a large number of investors. And this way, the corporation or government can raise money/capital. A bond is a written contract between the issuer (borrower) and the investor (lender) that specifies: Sold by the government of canada to public. The government is borrowing money from the public. The yield rate will vary with the financial climate and it will affect the price at which bonds are traded. Whereas the bond rate is set by the bond issuer and is xed for the entire term of the bond. C = redemption value of the bond r = bond rate per interest period i = yield rate per interest period n = number of interest periods until the redemption date. P = purchase price of the bond to yield i.
