COMMERCE 2FA3 Lecture Notes - Lecture 7: Fixed Income, Cash Flow, Financial Statement

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2FA3
• Professor: Will Huggins

Document Summary

In its broadest sense, a bond is any debt instrument that promises a fixed income stream to the holder. Fixed income securities are often classified according to maturity, as follows: Less than one year bills or paper . 1 year < maturity < 7 years notes. A typical bond has the following characteristics: A fixed face or par value, paid to the holder of the bond, at maturity. A fixed coupon, which specifies the interest payable over the life of the bond. Coupons are usually paid either annually or semi-annually. Term-to-maturity: the time remaining to the bond"s maturity date. Coupon rate: the annual percentage interest paid on the bond"s face value; to calculate the dollar value of the annual coupon, multiply the coupon rate by the face value. If the coupon is paid twice a year, divide the annual coupon by two.