MGT 181 Chapter Notes - Chapter 7: Interest Rate Risk, Premium Bond, Zero-Coupon Bond
Document Summary
The stated interest payment made on a bond. The principal amount of a bond that is repaid at the end of the term. The annual coupon divided by the face value of a bond. The specified date on which the principal amount of a bond is paid. Bonds are issued when a corporation or government wants to borrow money on a long term basis. Only pay interest payments until the end when they pay back the principal plus the last interest payment. If a corporation borrows for 30 years at 12%, then they pay a year every year for 30 yrs, and during the last year they pay back the principal as well. The rate required in the market on a bond. Interest rates change in the marketplace, but the cash flows from a bond do not. When interest rates rise, the pv of a bond"s remaining cash flows decreases.