ECON 2560 Chapter Notes - Chapter 6: Opportunity Cost, Interest Rate Risk, Liquidity Risk
8 Jul 2014
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Bond: government and corporations borrow money from investors by selling them bonds: the money governments or companies collect when bonds are issued is the amount of their debt, as borrowers, they promise to make a series of interest payments and then to repay the debt at the maturity date, a bond is a debt security, under which the issuer (government or companies) owes the holders (investors) a debt, and is obligated to pay them interest (coupon) and to repay when the maturity level expires. Coupon: interest payment paid to the bondholder from the government or corporations; coupon payments = interest payments: at maturity, the debt is repaid, when the borrower pays the bond"s face value to the bondholders, before computers, a typical bond had paper coupons that the investors (bondholders) had to clip off and mail to the bond issuer to claim the interest payment.
