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Lesson 9: Bonds

# Annual interest varying with debt maturity

Annual Interest Varying with Debt Maturity. Created by Sal Khan.

## Want to join the conversation?

• How would you go about calculating the exact interest % in one week if the interest rate was 5%/year? would it just be 5% / (number of weeks in an year) or does it depend on how often it's compounded?
• why would u give less interest in two years than 1 week i would charge less interest in 1 week than two years
• Because even though the "effective" rate of interest is higher in one week, you wouldn't make as much as the "stated" interest will pay out in a year's time.

Depending on how often the money is compounded, you will almost always get more money over a longer period of time, given that the borrower is financially healthy.
• XYZ corporation issues a \$1000 bond with coupons at J2= 8percent and redeemable at par on 1 August 2027.
A)How much should be paid for this bond on 1 February 2012 to yield J2=10percent??
B)If tge purchase price was \$1050 and the bond is held to maturity determine the overall yield, J2??
• The bond had a face value of \$800,000 and makes quarterly interest payments of \$24,000 (the first payment was made on time on September 1, 2015). The bond was sold for \$841,031. Also - 123 Inc.’s CEO just attended a corporate finance seminar and learned about bond yields, she would like you to calculate the yield that her company’s bonds’ offer
(1 vote)
• last year meg paid a dividend of \$1.75 you anticipate that the company growth rate is 6% and have required rate of return of 9% for this type of equity investment. what is the max price you would be willing to pay for the stock using the gordon model
(1 vote)
• with the aid of a diagram explain the relationship between market interest rate and bond price