Microsoft PowerPoint - PoF.ppt

Characteristics 102

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Zero-coupon bonds / pure discount bonds:

pay no coupons

prior to maturity and pay the face value at maturity

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single

payment at maturity!

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Fixed

(Straight) coupon bonds

/ bullet bonds: pay a stated

coupon periodically and pay the face value at maturity

Consol bonds

/ perpetual bonds: no maturity date and pay a

stated coupon periodically

Ä

they pay only interest

Annuity bonds:

pay a mix of interest and principal for a finite

amount of time

Deferred coupon bonds:

permit the issuer to avoid coupon

payments for a certain period of time

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Floating

Ä

“floating rate note” (FRN):

coupon is reset

periodically

Multi-period deterministic cash flows: FI securities - Introduction