FIN 3312_Exam4REVIEW - Copy.pdf

FIN 3312_Exam4REVIEW - Copy.pdf - Review List of Material...

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Review List of Material for 4 th Exam Chapter 6 Bonds o What are bonds? o Loans with (potentially) more lenders o Issuer = borrower o Investor = lender o Bond Characteristics o Who issues bonds: Government Federal o Treasury o Federal agencies State and local o Municipal- may be tax free Foreign o Governments and corporations Exchange rates Eurobonds Corporations o Characteristics Par Value (Face Value) Always $1000 for us Paid at the end of the bond life Thought of as principal of the loan Coupon interest rate (Coupon Rate) Stated interest rate on bond NEVER I/YR in calculator!! Coupon Payment (PMT) This is the interest payment on the bond Can be annual or semi-annual o Annual PMT = Coupon Rate x Par o Semi-annual PMT = (Coupon Rate x Par) ÷ 2 Maturity Date End of bond life Par value is repaid, effectively paying off the loan Usually referred to as “time to maturity” Determines the N in the calculation o N will always be the number of coupon PMTs remaining on the bond o Indenture:
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