Today's lesson is on definitions of various major bond market terminology. Below is a small list of key terminology:
•Bonds: obligation to pay and/or redeem agreed amounts on specified future dates
•Secured Bonds: security (financial and/or asset) attached to the bonds
•Face Value: the promised value of a bond
•Bond Price: current value of bonds
•Coupon: the periodic payments made by issuers as a form of rental for issuing
•Yield: the actual cost of financing
It is also important to note the relationships between the definitions. Below are the links between the key terminologies.
§Coupon is not related to Yield
§Yield is proportional to Tenure
§Yield is proportional to credit risk
§Coupon is more of a marketing tool
§Coupon is subject to issuer’s cash flow ability
§Yield is inversely proportional Bond Price
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.