Bonds and bond yields Flashcards
(7 cards)
1
Q
what are bonds?
A
loans made by investors to governments and firms
2
Q
what is a yield?
A
the annual rate of return on the bond
3
Q
what is a coupon?
A
fixed annual interest rate on the nominal value of the bond
4
Q
what is the nominal value of a bond?
A
the actual value of the bond regardless of how much you’re paying for it (e.g you want to borrow 100 so your nominal value is 100 regardless of how much interest you actually pay)
5
Q
what is the market price?
A
how much the bond can be bought for
6
Q
what is the maturity of a bond?
A
how long the government or firm has to pay back the bond
7
Q
how is the bond yield calculated?
A
coupon / market price x100
