# bond concepts

1. coupon rate = coupon rate at issurance? 2. current market rate is different from market rate at issurance…but we always use the latter to calculate interest; do we ever use the former? 3. the issuer of bond pays coupon payment, is that also cash interest payment? if not, what is the interst payment that calculated by market interest rate and the beginning book value ? someone explaine how it works please?

btw…schweser notes is really a failure in explianing this well to someone who don’t have finance background:((( terminoloty inconsistency kills!

1. Coupon rate never changes… unless it’s floating so yes, coupon rate at issuance… 2) Are you talking about interest expense on CFO? 3) The beginning BV is the PV of the bond (not face value). You multiply that by the YTM at issuance. It gives you your interest expense. Go forward a year. Redo all your calculations to find the PV but with the bond a year older and you have your new PV times YTM at issuance. I’m not sure but I hope I answered your question.

Send me an email or msn and I could explain it better live if you have specific stuff you’re not understanding. anthony_mea@hotmail.com

if coupon is the interest the issuer pays to holder, why there is a calculated interest (from market interest rate multiplied by beginingn book value)

vanessa Wrote: ------------------------------------------------------- > if coupon is the interest the issuer pays to > holder, why there is a calculated interest (from > market interest rate multiplied by beginingn book > value) you are confusing the 2: the issuer pays a coupon fixed payment and then interest, which changes year to year depending on the beg book value. you can find the PV of a bond any time forward by changing n on your calc then hitting PV. PV * YTM = int exp. int exp is a hit on the income stmt and a hit to CFO on the SCF