How to value bonds and shares Flashcards
1
Q
Define a bond
A
a certificate showing that a borrower owes a specified sum.
To repay the money, the borrower has agreed to make interest and principal payments on the designated dates.
2
Q
What are the 3 types of bonds?
A
pure discount bonds
level coupon bonds
consols
3
Q
What is the stated annual interest rate
A
5.06% per year compounded every 6 months
4
Q
Consols are the same as
A
Perpetuities
5
Q
In a par bond, the coupon rate equals
A
the interest rate
6
Q
In a discount bond, the coupon rate is
A
less than the interest rate
7
Q
In a premium bond, the coupon rate is
A
more than the interest rate
