Fixed Income

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Notation

Characters Used

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The face value of the bond. This is the value that is paid when the bond matures.

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Coupon payment rate. The rate is in terms of the face value of bond. So the coupon payment of a bond would be:Failed to parse (MathML with SVG or PNG fallback (recommended for modern browsers and accessibility tools): Invalid response ("Math extension cannot connect to Restbase.") from server "https://wikimedia.org/api/rest_v1/":): {\displaystyle (F*c)/2}

Failed to parse (MathML with SVG or PNG fallback (recommended for modern browsers and accessibility tools): Invalid response ("Math extension cannot connect to Restbase.") from server "https://wikimedia.org/api/rest_v1/":): {\displaystyle Y}

Yield or bond equivalent yield. This is the internal rate of return of the bond.

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This is the date during which the parties negotiate the rate of the bond.

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This is the settlement date of the bond (the date at which the bond is exchanged for its consideration).

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This is the price of the bond

Actual/Actual Calendar

This is the method used to calculate the price of Treasury bonds when the settlement date is in between two coupon payments. The price of the bond should include interest determined by this fraction: the number of days between the next coupon date and the current settlement date divided by the number of days between the last coupon payment and the next coupon payment.

30/360 Calendar

This is the method used to calculate price of Corporate and Muni bonds when the settlement date is in between coupon payments. It is assumed that each month has 30 days and a year has 360 days.

Flat Price

This is the price of the bond minus any accrued interest.