Question

How is the fixed payment loan similar to coupon bond? How is it different?

How is the fixed payment loan similar to coupon bond? How is it different?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Fixed payment loans are similar to coupon bond in their structures. Both these payment mechanisms have a fixed repayment schedule ie Interest every period for loan and Coupon every period for the bond till maturity after which the principal is also repaid.

The difference in both these instruments lie in the tradeability of instruments. While fixed payment loans cannot be traded, bonds are traded in the secondary market where the price discovery happens with the change in yield to maturity of these bonds. So bonds can be subject to mark to market if needs be to assess the actual debt value in the balance sheet.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is stock? What is a bond? How are they different? How are they similar? Define...
What is stock? What is a bond? How are they different? How are they similar? Define private saving, public saving, national saving, and investment. How are they related?
We have discussed how to calculate the yield to maturity for a fixed-payment loan. Now, we...
We have discussed how to calculate the yield to maturity for a fixed-payment loan. Now, we can applied the process to find the interest for a bond. Consider a $1,000-face-value bond with 5 years to maturity and yearly coupon payments of $100, which means you will receive $100 every year for the next five years and $1,000 at maturity. Suppose the price for this bond is$1,000. A. Calculate the interest (yield to maturity) for this bond. You need to write...
A loan that requires the borrower to make the same payment every period until the maturity...
A loan that requires the borrower to make the same payment every period until the maturity date is called a [A].   A [B] pays the owner of the bond a fixed interest payment every period, plus the face value of the bond at the maturity date. A credit market instrument that pays the owner the face value of the security at the maturity date and nothing prior to then is called a [c]. A [D] requires the borrower to repay...
7.    Consider a one-year coupon bond with face value of $100 and coupon payment equal to...
7.    Consider a one-year coupon bond with face value of $100 and coupon payment equal to $10 paid every 6 months. The market interest rate on similar coupon        bonds is 12%.        SHOW ALL STEPS.        (a) Find the price of the one-year coupon bond.        (b) Assume a one-year zero coupon bond is priced at $93. Find the bond’s               yield to maturity.        (c) The current yield on 6 mo. bonds is 7%.        (d) Create a...
You are given the following information for a semi-annual coupon payment bond: Coupon rate: 2.5%, par...
You are given the following information for a semi-annual coupon payment bond: Coupon rate: 2.5%, par value $1,000 Price quote: 98:14 Days since last coupon settlement: 73 Days separating coupon payments 182 What is the flat price of the bond? How much is the accrued interest on the bond? What is the full price of the bond?
A(n) $18,000 face coupon bond with a $50 annual coupon payment has a coupon rate of...
A(n) $18,000 face coupon bond with a $50 annual coupon payment has a coupon rate of ______%?
You purchase a 8 - year bond for $1,015. It pays a semi-annual coupon payment of...
You purchase a 8 - year bond for $1,015. It pays a semi-annual coupon payment of $40. You expect to sell the bond in 2 years. You estimate that similar bonds will be priced to yield 7% at the time of the sale. If you can reinvest the coupon payments at 6% annually, what is your expected total return for the 2 - year holding period? 1) 9.23% 2) 5.73%                                                               3) 7.58% 4) 8.71% 5) 6.59%
1. Calculate bond price if the coupon payment is 8%, yield for the bond is 10%,...
1. Calculate bond price if the coupon payment is 8%, yield for the bond is 10%, bond's face value is 1,000 and matures in 6, if paid semi-annually (Enter the answer in dollar format without $ sign or thousands comma -> 3519.23 and not $3,519.23 or 3,519.23) 2. Calculate the annual coupon payment if the semi-annual coupon paying bond price is $803, the yield for the bond is 5%, the bond's face value is $1,000 and matures in 6 years....
Arthur bought a semiannual coupon bond 12 years ago. The bond has a coupon rate of...
Arthur bought a semiannual coupon bond 12 years ago. The bond has a coupon rate of 9% and matures in 8 years. The next interest payment is scheduled for six months from today. If the yield on similar risk investments is 11.5%, what is the expected price of the bond two years from today?
Bond A is a 6 % coupon bond with annual payment and 1 year to maturity....
Bond A is a 6 % coupon bond with annual payment and 1 year to maturity. The bond face value is 1,000 and the bond is currently selling at $980.70. Investors expect the inflation rate to be 3% during the year, but at the end of the year, the inflation rate turned out to be 2%. What is the nominal interest rate on this bond? Calculate the nominal interest rate What is the expected real interest rate on this bond?...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT