ECON 2560 Chapter Notes - Chapter 6: Accrued Interest, Current Yield, Interest Rate
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Theory of Finance
The interest payment paid to the bondholder. 184
Payment at the maturity of the bond. Also called par value or maturity value. 184
Annual interest payment as a percentage of face value. 184
Coupon interest earned from the last coupon payment to the purchase date of the bond. 186
Clean bond price:
Bond price excluding accrued interest. 186
Dirty bond price:
Bond price including accrued interest. 186
Present value of a $1 received each of t periods, at various interest rates.
Discount factor or present value interest factor:
Present value of a $1 future payment.
Annual coupon payment divided by current bond price. 191
Bond that sells for more than its face value. 191
Bond that sells for less than its face value. 191
Yield to maturity:
Interest rate for which the present value of the bond's payments equals the price. 191
Interest Rates and Bond Prices (annually)
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