Amortized Bond

In the bullet bond we are getting a total of 1000+60*5 = 1300 back over the course of 5 years.

But in the Amortized Bond we are only getting back 237.40*5 = 1187 back.

Is my understanding correct or am I missing something?

In both cases the investor receives its money that he lended out (total principal repayment in both cases is $1.000 see third rpw).

In the amortized Bond case the investor receives less interest because the outstanding principal decreases over the years. The person/company taking the loan only pays interest over the initial loan -/- the principal repayment.

1 Like

Thanks a lot this cleared my doubts.

You’re correct.

Is there a problem?

No just wanted to confirm that :sweat_smile:.

My pleasure.

How do you calculate the payment amount for partially amortized bonds using BAII calculator

Set FV to something other than zero.