Management and Organizational Studies 2310A/B Chapter Notes - Chapter 6: Yield Spread, High-Yield Debt, Negative Number

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Danny Morrison

Document Summary

Indicates the percentage of face value paid out as coupons each year. If n is not in years, then the ytm, calculated in equation 6. 3 will not be an effective rate per year. In the case of a zero coupon bond, the price is simply equal to the present value of the (cid:271)o(cid:374)ds fa(cid:272)e (cid:448)alue, dis(cid:272)ou(cid:374)ted at the (cid:271)o(cid:374)d"s yield to (cid:373)aturity. 6. 3 coupon bonds: coupon bonds pay investors the face value at maturity, in addition these bonds make regular coupon interest payments, government of canada bonds are sold with maturities of 2,5,10, or 30 years. Coupon bond cash flows: the return on a coupon bond comes from two sources (1) any difference between the purchase price and the face value (2) periodic coupon payments. If a bond sells at par (its face value) the only return investors will earn is from the coupons the bond pays.