Management and Organizational Studies 2277A/B Chapter Notes - Chapter 12: Sinking Fund, Money Market Fund, Interest Rate

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2277A/B
• Professor: Barry Hawn

Document Summary

Investing in bonds: background on bonds, investors commonly invest some of their funds in bonds. Allows investors to bene t when the issuer"s stock price rises: these bonds tend to offer a lower interest rate because of the demand for the feature. If rates increase, they can redeem their bond and invest their money at a higher interest rate. Would generate a capital gain because the purchase price would be less than the principle amount to be received: premium bond: a bond that is trading at a price above its par value. Results in a yield curve, the longer the maturity, the higher the yield. Upwards slope: three common theories about the shape of the yield curve, liquidity preference theory, suggests that investors require premium for investing in long-term bonds. As the maturity increases, the required rate of interest also increases. Types of bonds: government of canada bonds, debt securities issued by the canadian government.