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bonds - The bond also pays a fixed periodic payment of $C C...

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We use the saving investment identity to analyze the effects of changes in government purchases Bonds Coupon bonds Treasury Coupon Bonds (Risk Free) Definition A coupon bond is a financial instrument with a fixed term to maturity (Denoted as n- years) It pays a “balloon” payment of $ M on maturity at t=n. M- is known as the “principal” or as “maturity value”, or as “par value”, or as “face value” of the bond.
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Unformatted text preview: The bond also pays a fixed periodic payment of $C. C is known as the coupon. In the US, coupons on treasuries are paid every 6 months. In class, for simplicity, we assume that coupons are paid annually. The CF s (Cash flow) of a coupon bond are:...
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