ECON206 Chapter 4: Chapter 4

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ECON206 Full Course Notes
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ECON206 Full Course Notes
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Cash flows: cash payments to the holder of a security. Present value: today"s value of a payment to be received in the future, when the interest rate is i. Annuity pv = c * 1/i * (1 1/(1+i) n) Simple loan: a credit market instrument that provides the borrower with an amount of funds that must be repaid to the lender at the maturity date along with an additional payment (interest). Fixed payment loan: a credit market instrument that provides the borrower with an amount of money that is repaid through fixed periodic (usually monthly) payments made over a set number of years. Coupon bond: a credit market instrument that pays the owner a fixed interest payment every year until the maturity date, at which time a specified final amount is repaid. Face value: a specified final amount paid to the owner of a coupon bond at the maturity date.

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