SMG FE 101 Lecture Notes - Lecture 8: United States Treasury Security, Interest Rate Risk, Premium Bond
6 Apr 2016
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Only thing that can change is i or n : interest rate risk or credit risk can change, or time can change. Bond securitized debt: stocks represent ownership bonds don"t (get no voting rights, bond owners have different rights written in bonds. If company misses one payment, you"re allowed to sue them. Shareholders can"t do that (would be like suing yourself) Bond certificate: terms of the bond = amounts and date of all payments to be made. Maturity date and term (same thing) time remaining until the repayment date. Face value (aka par value or principal amount: notional amount used to compute interest payments, usually standard increments, such as ,000, typically repaid at maturity. Coupon rate: set by the issuer and stated on the bond certificate, by convention expressed as an apr, so the amount of each coupon payment, Only two cash flows: the bond"s market price at the time of purchase, the bond"s face value at maturity.
