Unit 3 Assignment 1.docx - Joni Radclif BUS3062 Unit 3...

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Joni Radclif BUS3062 Unit 3 Assignment 1 1. A call provision (or call feature) is a bond that can be refinanced. This means that the issuer of the bond can call the bond back and repay the principal before the date of maturity arrives. When a bond is called, the bondholder receives the principal and also one year’s worth of interest payments. 2. A premium bond is a bond that sells for greater than its par value such as a Treasury bond. A discount bond is a bond that sells for lower than its par value such as corporate bond. The market interest changes reflect bond prices depending on the term of maturity, tax status and credit worthiness. 3. A 5 percent coupon bond means that the issuer of the bond will by 5 percent of the bonds value in interest every year. Companies that issue the bonds set up the coupon rate at the current market interest rate at that time. A zero coupon bond makes no interest payments, but normally sells at a more of a discount and pays the par value at the maturity date.
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  • Spring '08
  • Thomas
  • Zero-coupon bond, percent coupon bond

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