2557A/B- Midterm Exam Guide - Comprehensive Notes for the exam ( 36 pages long!)
13 Oct 2017
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Document Summary
Security: a document that confers upon its owner a financial claim. Derivative contracts - forwards, futures, options, and swaps. Bond: a document that gives its owner the right to a fixed, predetermined payment at the maturity date. Nominal value/face value/par value/principal: amount of payment at maturity. Specifics of bond are timing, amount, paying/receiving, counterparties. Coupon bonds: bonds for which the debtor makes periodic payments to the creditor. At maturity, last coupon and nominal value is paid. Equivalent to basket of pure discount bonds with nominal values = coupons: if bond price = nominal value, at par o o. If bond price > nominal value, above par. If bond price < nominal value, below par. Corporations borrow regularly to finance business opportunities o o o o. Bonds issued by corporation are called deb: governments and other entities issue bonds to fund public work projects.
