Textbook Notes (368,070)
Canada (161,617)
Economics (818)
ECON 2560 (71)
Chapter 6

ECON 2560 - Chapter 6.docx

6 Pages
116 Views
Unlock Document

Department
Economics
Course
ECON 2560
Professor
Nancy Bower
Semester
Fall

Description
TheoryofFinanceChapter6INTERESTRATESANDBONDPRICESBondGovernmentandcorporationsborrowmoneyfrominvestorsbysellingthembondsoThemoneygovernmentsorcompaniescollectwhenbondsareissuedistheamountoftheirdebtoAsborrowerstheypromisetomakeaseriesofinterestpaymentsandthentorepaythedebtatthematuritydateAbondisadebtsecurityunderwhichtheissuergovernmentorcompaniesowestheholdersinvestorsadebtandisobligatedtopaytheminterestcouponandtorepaywhenthematuritylevelexpiresCouponInterestpaymentpaidtothebondholderfromthegovernmentorcorporationscouponpaymentsinterestpaymentsoAtmaturitythedebtisrepaidwhentheborrowerpaysthebondsfacevaluetothebondholdersoBeforecomputersatypicalbondhadpapercouponsthattheinvestorsbondholdershadtoclipoffandmailtothebondissuertoclaimtheinterestpaymentCouponRateBondsCouponFaceValueFaceValuePaymentdueatthebondsmaturityMaturityThedateatwhichtheloanwillbepaidoffwhenyouwillgetyourinterestpaymentCouponRateTheannualinterestpaymentdividedbythefacevalueofthebondoHowmuchtheinterestthecompanyispayingoutoCalculatedasapercentageoffacevalueoStaysthesamethroughoutthelifeofthebondExampleTelusbondhasafixedcouponpaymentbasedonits505percentcouponrateandthebondwillmatureinJuly2020Telushastomakecouponpaymentsfor10yearsandthenhastorepaythe1billionfacevalueDividendYourreturnofthemoneyyouinvestedinstockoItisyourpayoutfromstocksharesInterestRateDiscountRateTherateatwhichthecashflowsfromthebondarediscountedtodetermineitspresentvalue
More Less

Related notes for ECON 2560

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit