FacePar Value the payment to the bondholder at the maturity of the bond Coupon

Facepar value the payment to the bondholder at the

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Face/Par Value: the payment to the bondholder at the maturity of the bond Coupon rate: a bond’s annual interest payment per dollar of par value Zero-coupon bond: a bond paying no coupons that sells at a discount and provides only a payment of par value at maturity Accrued Interest = ( annual coupon payment ) 2 x dayssincelast coupon payment days separatingcoupon payments Corporate Bonds: Call price: when corporate bonds are issued with call provisions, the issuer can repurchase the bond at a specified price before the maturity date Refunding: (sometimes companies issues bonds with high coupon rates when market interest rates are high, and then the interest rates fall… the firm might want to retire the high-coupon debt and issue new bonds at a lower coupon rate to reduce interest payments) the proceeds from the new bond issue are used to pay for the repurchase of the existing higher-coupon bonds at the call price Callable bonds: bonds that may be repurchased by the issuer at a specified call price during the call period p295 Convertible bonds: a bond with an option allowing the bondholder to exchange the bond for a specified number of shares of common stock in the firm Put bond: a bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years Floating-rate bonds: bonds with coupon rates periodically reset according to a specified market rate Preferred Stock: promises to pay a specified stream of dividends; unlike bonds, if the company does not pay the promised dividends, they do not fall to bankruptcy rather the dividends owed cumulate and pay the preferred stockholders in full and the common stockholders may not get the dividends International Bonds: Foreign Bonds: issued by a borrower from a country other than the one in which the bond is sold; denominated in the currency of the country in which it is marketed; registered with the SEC; ex, if a German firms sells a dollar-denominated bond in the U.S. Eurobonds: denominated in one currency, usually that of the issuer and sold in other national markets; not regulated by U.S. federal agencies; ex, dollar-denominated bonds sold outside of the U.S. Inverse floaters, asset-backed bonds, pay-in-kind bonds, catastrophe bonds, indexed bonds p297-298 Bond pricing p299 Bond Yields:
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Yield to maturity (YTM): the discount rate that makes the present value of a bond’s payments equal to its price Current yield: annual coupon divided by bond price Premium bonds: bonds selling above par value p306, 311 Discount bonds: bonds selling below par value Realized compound return: compound rate of return on a bond with all coupons reinvested until maturity Horizon analysis: analysis of bond returns over a multilayer horizon, based on forecasts of the bond’s YTM and the reinvestment rate of coupons p309 Reinvestment rate risk: uncertainty surrounding the cumulative FV of reinvested bond coupon payments Default risk and bond pricing: p314 Investment grade bond: a bond rate BBB and above by S&P, or Baa and above by Moody’s
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