Midterm G4: Valuation Of Fixed Income Instrument Flashcards
Stated value from the firms balance sheet
Book value
The price for the asset at any given time
Market value
Present value of the assets expected cash flow
Intrinsic value
Also called the face value
PAR value
Borrowers typically make periodic payments to the bond holders. It is the percent of face value paid every year.
Coupon interest rate
Document which details the legal obligation of the corporation to the bond holders
Indenture
Time at which the maturity is paid to the bondholder
Maturity
Types of bonds
Debentures
Mortgage bond
Subordinated debentures
Eurobond
Convertible bond
Junk bond
Zero coupon bonds
An application of present value
Bond valuation
The present value of all the cash flows the investor receives as a result of holding the bond
Value of the bond
The rate at which future cash flow’s are being discounted to present
Interest rate for time value
Is the total return anticipated on a bond if it is held until it matures
Yield to maturity
Refers to the potential loss in value of an investment or asset, due to fluctuations in interest rates
Interest rate risk
