BU111 Lecture Notes - Capital Gain, Canada Savings Bond, Market Price
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BU111 Full Course Notes
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Document Summary
Represents debt for issuing corporation or government. Characteristics: legal, binding agreement fixed rate of return (often paid semi annually) Fixed term principal repaid at maturity. Coupon rate & prevailing rate of interest (relationship) Yield = what you made/what you paid = interest + capital gain/what you paid. For a bond interest = coupon rate x face value. Capital gain = face value purchase price. You pay less than face value (<1000) for the bond = priced at a discount . You pay more than face value (>1000) for the bond = priced at a premium . You pay face value (=1000) for the bond priced at par . When coupon rate is less than the expected yield. When the coupon rate is more than expected yield. When coupon is equal to the expected yield. Maturity when you will earn back the face value. Voting rights who should be on board of directors, you part own company.
