GMS 200 Lecture Notes - Lecture 6: Investment, Yield Spread, Yield Curve

• School: Ryerson University
• Department: Global Management Studies
• Course: GMS 200
• Professor: Bamediele Adukunle

Document Summary

Lecture 6: bonds: financial contracts that promise specified cash flows in the future, ex: Issuing institution has an obligation to pay promised cash flows: treasury bills, commercial paper, canada saving bonds, corporate bonds. States the terms of a bond as well as the amounts and dates of all payments to be made. Usually paid semiannually, but the frequency is specified in the bond certificate. They are determined by the coupon rate, which is stated on the bond certificate. The notional amount used to compute the interest payment. It is usually repaid on the maturity date. face value: bond valuation: north american bonds almost always pay coupons semi-annually, zero coupon bonds, also known as strip bonds, pure discount instrument (pays no coupons) Interest rate risk and bond prices: effect of time on bond prices is predictable, but unpredictable changes in yields also affect prices, bonds with different characteristics will respond differently to changes in yields.