MGT338H5 : Bonds
Document Summary
Here we discuss the basic features of bonds. A bond (also called debenture) is a legally binding agreement between a borrower (the bond issuer) and a lender (the bondholder). The agreement specifies the principal amount of the loan, the timing and amount of the cash flows, and any other provisions: A bond specifies a face amount (f), and a bond interest rate, also called the coupon rate. The bond also specifies a maturity date, or term to maturity, during which the coupons (the bond interest payments) are to be paid, and the redemption amount to be paid on maturity. Bonds typically make coupon payments once per year (europe) or semi annually (united. P = c[1- (1+r)-n]/r + f/(1+r)n = cxpvifa(n,r) + f/(1+r)n. For example, a bond with face value ,000, a 9% coupon rate, and semi annual payments, pays every 6 months until maturity.
