Week 2 Flashcards
Valuing bonds
1
Q
Coupon
A
Annual interest rate paid on a bond
2
Q
Yield to maturity
A
Discount rate that explains the bond price
3
Q
Premium
A
Bond is priced above face value
4
Q
Discount
A
Bond is priced below face value
5
Q
Asked price
A
Price you need to pay to buy the bond from a dealer
6
Q
Macaulay duration
A
Measure of average life
7
Q
Term structure of interest rates
A
Relationship between short- and long-term interest rates
8
Q
Spot rate (r_1)
A
Present value of one-year rate of interest
