- The rate of return and the future changes to the bond prices . Concept Introduction Coupon Bond - A coupon bond is issued by a corporation or government with a given face value, coupon rate and date of maturity. The lender issues the bond to the borrower. The latter receives a fixed interest income in each period equal to the coupon value. At the time of maturity, the face value of the bond is repaid to the creditor. Present value - It implies the current value of the future income or stream of cash flows calculated with a given discount rate. This discount rate is inversely related to the present value of the income. Yield to maturity - It is the annual percentage rate or APR commonly known as the discount rate at which the sum of the future stream of income equals the current price of the bond. It is the most accurate measure of the interest rate and is often called the Internal Rate of Return or IRR

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Chapter 4, Problem 5Q

To determine

To determine- The rate of return and the future changes to the bond prices.

Concept Introduction

Coupon Bond- A coupon bond is issued by a corporation or government with a given face value, coupon rate and date of maturity. The lender issues the bond to the borrower. The latter receives a fixed interest income in each period equal to the coupon value. At the time of maturity, the face value of the bond is repaid to the creditor.

Present value- It implies the current value of the future income or stream of cash flows calculated with a given discount rate. This discount rate is inversely related to the present value of the income.

Yield to maturity- It is the annual percentage rate or APR commonly known as the discount rate at which the sum of the future stream of income equals the current price of the bond. It is the most accurate measure of the interest rate and is often called the Internal Rate of Return or IRR

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