face value
The amount the bondholder will be repaid at maturity.
coupon rate
the interest paid on a bond, expressed as a percentage of the bond's
par value
expressed in APR
coupon payment formula
(Coupon Rate)*(Face Value)/(# of payments per year)
zero coupon bond
a bond that makes n...
✓ the longer the maturity, the higher the YTM because of liquidity and risk
✓ *longer bonds might have lower coupon rates because there are so
many coupon payments
what is the relationship between interest rates and bond prices?
✓ inverse relationship
✓ - as interest rates and yields rise, bond prices fall (vice versa)
bond duration
✓ Measures the sensitivity of a bond's price to interest rate movements.
The approximate percentage the value of the bond will fall for each
1% increase in market interest rate
✓ (not the same as maturity)
bond with high durations are ____ sensitive to interest rate changes
bonds with low durations are ____ less sensitive to interest rate changes
Master01 | October, 2024/2025 | Latest update
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