Unit 3: Pricing Stocks and Bonds Flashcards
What is a Coupon?
The stated interest payment made on a bond.
What is the face (or par) value of a bond?
The principal amount of a bond that is repaid at the end of the term.
What is a coupon rate?
The annual coupon divided by the face value of a bond.
What is a a bond “maturity”?
Specified date at which the principal amount of a bond is paid.
What is Yield to Maturity (YTM)?
The market interest rate that equates a bond’s present value of interest payment and principal repayment with it’s price.
True or falseYield is another term for “Yield to Maturity”
True
What 4 pieces of information are required to determine the value of a bond?
number of periods remaining until maturity the face value the coupon the market interest rate for similar bonds
True or falseA bond that pays $56 a year has a present value of $56.
False
A bond’s value can be determined by adding the ______ and _______
Bond’s Present Value Bond’s Annuity Present Value
True or falseA bond that sells for less than it’s face value is called a discount bond.
True
True or falseBond = EquityStock = Debt
False
True or falseAll corporations and governments issue bonds of the same far value.
False
True or falseA face (or par) value is the market value of the bond at the time of maturity.
False
The amount repaid when a bond matures is the _____ value
Face or par
A ____ _____ is an agreement giving the corporation the option to repurchase the bond at a specified price before maturity.
Call provision
