ADMS 3530 Chapter Notes - Chapter 6: Accrued Interest, Dirty Price, Clean Price
Document Summary
Coupon: the interest payment paid to the bondholder. Face value: payment at the maturity of the bond (normally ) Accrued interest: coupon interest earned from the last coupon payment to the purchase date of the bond: clean price: bond price excluding accrued interest, dirty price: bond price including accrued interest. Market interest rate > coupon rate = bonds sell for less than face value (discount bond: bond that sells for less than its face value) Market interest rate < coupon rate = bond sells for more than face value (premium bond: bond that sells for more than its face value) Market interest rate = coupon rate = bonds sells at face value. Current yield: annual coupon payment divided by current bond price. Multiperiod rates of return (assuming 2 years: find future value of first payment, add fv of first pymt with coupon income of second, use rate of return formula.