COMMERCE 2FA3 Chapter Notes -Financial Statement, Yield Curve, Clean Price

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2FA3
• Professor: Kevin Brewer

Document Summary

A bond is normally an interest-only loan, meaning the borrower pays the interest every period, but none of the principal is repaid until the end of the loan. Coupons: the stated interest payments made on a bond. Face value: the principal amount of a bond that is repaid at the end of term. Government and provincial bonds frequently have much larger face or par values. Coupon rate: the annual coupon divided by the face value of a bond. Maturity date: specified date at which the principal amount of a bond is paid. Once the bond has been issued, the number of years to maturity declines as time goes by. To determine the value of a bond on a particular date, we need to know the number of periods remaining until maturity, the face value, the coupon, and the market interest rate of bonds with similar features.