ECON 203 Lecture Notes - Lecture 2: United States Treasury Security, Balanced Budget, Autarky

• School: University of Calgary
• Department: Economics
• Course: ECON 203
• Professor: Peter Tracey

Document Summary

Pb = (/1 + i) + (/1+i)2 + (/1+i)3 + (/1+i)4 + (/1+i)5. /(1+0. 10)2 = i = yield to maturity. It equates the price of the bond to the present value of its future stream of receipts. Par. i ^ (face value) fv = . Hold for 1 year and sell it for . Rate of return = c+( p1b-p0b) / p0b +/ = 33% Sold at a discount and when it matures, the buyer receives the face value. Ptb = i = yield to maturity = (-/) x 100 = 11. 11% **zero-coupon bonds: zeros maturity = duration (time it takes bond to pay itself) (coupon bonds with no coupon) Some people started shares at this price even though they thought they did not own any. Call options: you buy it for a fee. It gives you the right but not the obligation to buy share for a given price on a given day.