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Chapter 6

This

**preview**shows half of the first page. to view the full**3 pages of the document.**Theory of Finance

Bonds

Chapter 6

Coupon:

The interest payment paid to the bondholder. 184

Face value:

Payment at the maturity of the bond. Also called par value or maturity value. 184

Coupon rate:

Annual interest payment as a percentage of face value. 184

Accrued interest:

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

Annuity factors:

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.

Current yield:

Annual coupon payment divided by current bond price. 191

Premium bond:

Bond that sells for more than its face value. 191

Discount bond:

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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