TERM 1
Relationship between Interest rates and
Bonds
DEFINITION 1
Bonds is a piece of debt usuallly has a $1000 par vale, a
coupon or rate of interest, payments, and time to mature.
Interest rates known as yield. helps investors determine the
value of the bond by the Present value, payments of annuity
and the present value of the principal payment
TERM 2
Value
DEFINITION 2
same as PV of future CF's
TERM 3
Bond selling at par, premium, or discount
DEFINITION 3
yield higher than the coupon then BOND is a DISCOUNT Yield
is equal to coupon then BOND is at PAR Yiled is less than
coupon then BOND is at Premium
TERM 4
Weighted component costs of capital to
capital structure
DEFINITION 4
structure is long-term debt of types of stocks, the ways that
funds of fixed assets are acquired. To compute WACC need
the individual costst of the structure. like cost of debt, pref
stock and equity
TERM 5
Why cant debt financing be used to provide
all the capital for firm
DEFINITION 5
you have to look at all the capital budgeting, dividends.
