Review Part 2
Bond:
1. Definition of Bond
a. Debt Instrument: A bond is a long-term contract under which a
borrower agrees to make payments of interest and principal, on
specific dates, to the holders of the bond.
b. IOU
2. Government Bond (T-bill, T-note and T-bond)
a. 1. High liquidity;
b. 2. No default risk. (Risk free rate of return)
c. 3. Book entry form
d. T-bill: N < 1 year, selling at discount
e. T-note: 1 year < N < 10 years, coupon bond
f. T-bond: N > 10 year, coupon bond
i.
