Bonds & Fixed Income
5 terms
Bond
Bonds & Fixed Income
₹
A tradable debt instrument under which the issuer borrows a sum and agrees to pay interest and repay the principal at maturity.
Bond Price = Present Value of all Coupon Payments + Present Value of the Principal Repayment
Bond Covenant
Bonds & Fixed Income
qualitative
A condition in a debt agreement restricting the borrower's actions or requiring it to maintain stated financial ratios.
Test: the agreement specifies obligations whose breach constitutes an event of default, whether or not a payment is missed
Bond Market
Bonds & Fixed Income
qualitative
The market in which debt securities are issued and traded.
Test: the instrument traded represents a debt obligation rather than an ownership interest
Bond Price
Bonds & Fixed Income
₹
The present value of a bond's remaining cash flows, discounted at the yield the market requires.
Price = Sum of (Coupon / (1 + Yield) raised to t) + Face Value / (1 + Yield) raised to n
Bond Yield
Bonds & Fixed Income
%
The return a bond generates, expressed as an annual percentage of the price paid for it.
Yield varies by measure: Current Yield = Annual Coupon / Market Price; Yield to Maturity accounts for all cash flows and the redemption amount