BUSI 530 Chapter Notes - Chapter 6: Nominal Interest Rate, Premium Bond, Current Yield
Document Summary
Security that obligates the issuer to make specified payments to the bondholder. Bond: can"t buy on the stock exchange, most make coupon payments seminannually, depends on the rate of inflation and nominal interest rate. Prices are usually expressed as a percentage of their face value. Prices determine interest rates and therefore the time value of money. Notes: treasury bonds with when issued maturities of 2 to 10 years. Payment at the maturity of the bond: also called principal or par value. Coupon: the interest payments paid to the bondholder. Asked yield to maturity: measures the return to investors if they buy the bond at the asked price and hold it to maturity. When the market interest rate exceeds the coupon rate, bonds sell for less than face value. When the market interest rate is below the coupon rate, bonds sell for more than face value .
