Topic 3 Flashcards Preview

Corporate Finance Management > Topic 3 > Flashcards

Flashcards in Topic 3 Deck (12)
Loading flashcards...
1

bonds

long-term debt securities

2

notes

unsecured debt securities

3

coupon payments

the stated interest payments made on a bond (face value x coupond rate)

4

face value

the principal amount of a bond that is repaid at the end of the term (also par value)

5

par value

the face value of the bond

6

coupon rate

is the annual coupon divided by the face value of a bond

7

maturity

is the number of periods remaining till the principal amount is payable

8

yied to maturity(YTM)

is the market interest rate that is required in the market on a bond

9

bond at par

If the market interest rate is the same as the coupon rate, the bond's value is the same as the face value

10

a discount bond

If the market interest rate rises above a coupon rate, the bond's value falls below the face value.

11

a premium bond

If the market interest rate falls below the coupon rate, the bond's value rises abouve the face value

12

Bonds or debentures
Yied 12%
$1000 face value
Coupon 10% p.a. paid semi annually
ie 5% semi annually =$50
Term to maturity 5 years
ie 5 x semi annually = 10 payments
Market value of Debenture ?

$926