lecture 17 - Business Finance Lecture 17 Review of the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
94 Business Finance Lecture 17 Review of the Previous Lecture Perpetuity | The Effect of Compounding Periods z Effective Annual Rates z Annual percentage Rate | Loan Amortization Topics under Discussion | Bonds z Bond values and Yields z Valuing a bond Discount bonds Premium bonds Bonds | An evidence of debt issued by a corporation or a governmental body. | When a corporation (or government) wishes to borrow from public on a long term basis, it does so by issuing or selling debt securities generally called bonds | A bond represents a loan made by investors to the issuer. In return for his/her money, the investor receives a legal claim on future cash flows of the borrower. Bonds | The issuer promises to: z Make regular coupon payments every period until the bond matures, and z Pay the face/par/maturity value of the bond when it matures. | Default - since the abovementioned promises are contractual obligations , an issuer who fails to keep them is subject to legal action on behalf of the lenders (bondholders). Bonds | B Corporation z Wants to borrow $1,000 for 30 years at 12 % interest rate z Will pay 0.12 x $1,000 = $120 in interest every year for 30 years. z
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

lecture 17 - Business Finance Lecture 17 Review of the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online