a.
Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.
To calculate: Amount need to pay for purchase of one of these bonds.
b.
Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.
To identify: Coupon rate of the bond.
c.
Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.
To identify: Yield to maturity of a bond.
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EBK INVESTMENTS
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