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Characteristic of most T-Bonds and Corporate bonds; pay only interest
until maturity, at which time full face value is paid back.
Risk associated with fixed-income securities that have embedded
options, such as call options, prepayment options, or put options.
Changes in interest rate volatility affect the value of these options.
Actions that the borrower promises to perform
Risks outside the financial markets like natural disasters, and corporate takeovers, etc.
Yes, since the coupon interest payments must be reinvested, those cash flows are subject to reinvestment risk.
Duration
Risk of investor's principal being returned when interest rates fall, and as a result reinvesting at a lower rate.
Risk of security having to be sold for less than market value due to lack of liquidity.
absolute protection against call prior to maturity.
Total amount paid for bond, including accrued interest.Full Price = Clean Price + Accrued Interest
Cash Payment: issuer deposits cash with trustee who retires applicable
proportion of bonds at par using lottery selection.Delivery of
Securities: Issuer purchases bonds with equal total par value in the
market and delivers them to trustee who will retire them.
Coupon formulas based on inflation; Coupon Formula Ex.: 3% + annual change in CPI
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