ECON 295 Chapter 28: Chapter 28 notes.docx
9 Jan 2015
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Document Summary
Economists often simplify the analysis of financial assets by considering only two types of assets non-interest-bearing money and interest-bearing bonds . A bond is a financial asset that promises to make one or more specified payments at specified dates in the future. Present value ( pv ): the value now of one or more payments or receipts made in the future. Rt being a payment in the future (coupon or face value). Some make no coupon payments and only a single payment (the face value ) at some point in the future. Other bonds make regular coupon payments as well as a final payment of the bond"s face value. The present value of any bond that promises a future payment or sequence of future payments is negatively related to the market interest rate. The present value of a bond is the most someone would be willing to pay now to own the bond"s future stream of payments.
