ECON 1 Lecture Notes - Lecture 21: Premium Bond, Credit Risk, Promissory Note
Document Summary
Bond valuation: bonds - type of debt or long-term promissory note, issued by a borrower, promising to its holder a predetermined and fixed amount of interest per time period and repayment of principal at maturity. International loans issues by listed companies and other big institutions. In the case of insolvency, claims of debt, including bonds are honoured before those of common or preferred stock: par value. Is the face value of the bond, returned to the bondholder at maturity. In general, corporate bonds are issued at denominations or par value of. ,000: prices are represented as a % of face value. Thus a bond quoted at 112 can be bought at 112% of its par value in the market. Issuer must pay the bondholders a premium: there is also a call protection where the firm cannot call the bond for a specified period of time.
