Homework #8 - Robert Garza ECON 3131 Homework #8 Principal...

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Robert Garza ECON 3131 Homework #8 Principal - The amount of credit extended when one makes a loan or purchases a bond. Interest rate - The percentage return, or percentage yield, earned by the holder of a financial instrument. Coupon return - A fixed interest return that a bond yields each year. Nominal yield - The coupon return on a bond divided by the bond’s face value. Current yield - The coupon return on a bond divided by the bond’s market price. Yield to maturity - The rate of return on a bond if it is held until it matures, which reflects the market price of the bond, the bond’s coupon return, and any capital gain from holding the bond to maturity. Term premium - An amount by which the yield on a long-term bond must exceed the yield on a short-term bond to make individuals willing to hold either bond if they expect short-term bond yields to remain unchanged. Risk structure of interest rates - The relationship among yields on financial instruments that have the same maturity but differ because of variations in default risk, liquidity, and tax rates. Default risk
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This note was uploaded on 07/25/2011 for the course ECON 3311 taught by Professor Leonard during the Spring '09 term at University of Houston.

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Homework #8 - Robert Garza ECON 3131 Homework #8 Principal...

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