FIN 357 Chapter 7

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Premium Bond

A bond that sells above its par value ( or sell above face value).

Discount Bond

A bond that sells below par value (or sells below face value).

Current Yield

A bond's annual coupon divided by its price.

Coupon Rate

The annual coupon divided by the face value of a bond.

Face Value or Par Value

The principal amount of a bond that is repaid at the end of the term

Yield to Maturity (YTM)

The rate required in the market on a bond.

Interest Rate Risk

The risk that arises for bond owners from fluctuating interest rates.

Maturity

The specified date on which the principal amount of a bond is paid.

Coupon

The stated interest payment made on a bond

Indenture

The written agreement between the corporation and the lender detailing the terms of the debt issue.


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