RCSC 150B2 Chapter Notes - Chapter 14: Credit Risk, Commercial Paper, Mutual Fund
6 Dec 2017
School
Department
Course
Professor
Document Summary
When you buy a government bond, you are lending money, unsecured, so that the government can maintain or expand opera(cid:2210)ons. Use borrowed money for expansion, growth, or retooling. Bonds provide steady source of xed income that can help balance and diversify your por(cid:127)olio. Bond : debt instrument issued by a government or a company for the purpose of raising fund construc(cid:2210)on, take on new projects, or grow the business. A bond is a promise to repay the principal along with interest (cid:336) coupons (cid:337) by a speci ed date (cid:336) maturity (cid:337) Today nearly all interest payments are sent electronically to the registered bondholder. When you buy a bond you become a creditor of the issuer. Most bonds are bought and sold on a secondary market. Bond prices and interest rates moved in inverse direc(cid:2210)ons. When interest rates go up, prices go down. Selling at a premium : a price above the face value of a bond.
