EC223 Chapter Notes - Chapter 4: Cash Flow, Interest
Document Summary
Cash flows: different streams of cash payments. Simple loan: simple debt instrument: n= number of years, cf= cash flow in n number of years, i= interest rate, pv = present value. Simple loan lender provides borrower an amount of funds that must be repaid to lender: commercial loans, principal + interest. Fixed payment loan/fully amortized loan: lender provides borrower with funds and in return borrower makes equal same payments every period (monthly/semi-annually) that includes interest and principal: example: 126 dollars/month. Coupon bond: pays owner of bond fixed interest payment every year until maturity. First identified by corporation or government agency that issues. Third you identify coupon rate (coupon payment expressed in %) Discount bond/zero coupon bond: bought at a price below face value (at discount) Discount bond doesn"t make interest payments just pay off face value no fucken interest. Simple loans and discount bonds make payments on maturity dates pay at the fucken.
