COMM 308 Chapter 7: CH 7

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When a corporation or government wants to borrow money from the public on a long- term basis, it usually issues or sells debt securities generally called bonds. A bond is usually an interest-only loan; the borrower pays the interest every period, but the principal is repaid only at the end of the loan. A bond any debt instrument that promises a regular series of cash payments and full principal amount to the holder by the maturity date. Coupon the stated interest payment made on a bond. To find the coupon rate (c or i), multiply the bond"s face value by the coupon rate to calculate the annual payment divide by 2 if payments are made semiannually. : a bond with an 8% coupon rate will have an annual coupon or semiannual coupon. A bond with a 4$ semiannual coupon rate will have an annual payment and a semiannual payment.

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