Abstract
When lending funds the lender will want the principal returned (that is the original sum of money lent) and an interest rate usually expressed as a percentage per annum of the principal loaned. Interest rates charged on loans reflect many factors such as the length of the loan, the perceived risk attached to the borrower of funds, fundamental economic forces, the liquidity of the loan contact and expected inflation during the period of the loan. In this chapter we examine the fundamental forces that determine the price of bonds issued by governments, which in turn provides the benchmark for the cost of funds for corporations and other borrowers.
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Further reading
Blake, D. (2000) Financial Market Analysis 2nd edn, McGraw-Hill.
Fabozzi, F. (2003) Bond Markets Analysis and Strategies Prentice-Hall.
Reuters (1998) An Introduction to Bond Markets Wiley.
Chapter 6: The Domestic and International Board Market
Fons, J.S. and Kimball, A.E. (1991) ‘Corporate Bond Defaults and Default Rates 1979–1990’, Journal of Fixed Income Securities, 3rd edn. Homewood, Illonois: Business One, Irwin.
Macaulay, F.R. (1938) Some Theoretical Problems Suggested by the Movement of Interest Rates Bond Yields and Stock Prices in the US since 1856. New York: National Bureau of Economic Research.
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© 2005 Keith Pilbeam
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Pilbeam, K. (2005). The Domestic and International Bond Market. In: Finance and Financial Markets. Palgrave, London. https://doi.org/10.1007/978-1-349-26273-1_6
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DOI: https://doi.org/10.1007/978-1-349-26273-1_6
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