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AC1106
Bond Valuation
| Term | Definition |
|---|---|
| PVIF | Present Value Interest Factor |
| PVIFA | Present Value Interest Factor of an Annuity |
| Coupon | The states interest payment on a bond |
| Face Value | The principal amount of a bond that is repaid at end of the term. Also called Par Value |
| Coupon Rate | The annual coupon divided by the face value of a bond |
| Maturity | The specified date on which the principal amount of a bond is paid |
| Yield to Maturity | The rate required in the market on a bond |
| Bond Value | PV of face value + PV of annuity |
| Discount Bond | The bond that sells below its face value |
| Premium Bond | The bond that sells more than its face value |
| All other things equal, the longer time to maturity.... | The greater the interest rate risk |
| All other things equal, the lower the coupon rate,,, | The greater the interest rate risk |
| Types of bonds | Government Bonds Zero Coupon Bonds Floating Rate Bonds Exotics |
| Bond Market Characteristics | Bond Market Structure Bond Price Reporting Clean and Dirty Prices |
| Sinking Fund | People who hold bonds put away money to pay for the interest rates |
| Call Provision | To repay back bonds early |
| Call Price | The price in which the issuer has to rebuy back its bonds |