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Distinguish between the clean and dirty price of bond Bonds are long-term securities with a maturity of greater than a year
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Distinguish between the clean and dirty price of bond Bonds are long-term securities with a maturity of greater than a year - normally the original maturity is well above one year and can be over 20 years, but some government bonds are irredeemable. The main issuer of bonds in the UK is the government. Therefore, when people invest in a bond people are actually loaning money to an entity, be it to the government. As 'compensation' of the investment, interest is paid to the bonds. The interest rate of bonds is a fixed rate of interest, at set intervals until maturity, called a coupon, which is paid in two installments, semi-annual. Simply the price of a bond is the present value of its expected cash flows. The present value is normally lower than the future value. For example, if a person is holding £100 today without spending, the value of...
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