The Domestic and International Bond Market
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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.
KeywordsInterest Rate Cash Flow Credit Rating Corporate Bond Bond Price
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Chapter 6: The Domestic and International Board Market
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