Answer:
c. periodic interest payments.
Explanation:
A bond can be defined as a debt or fixed investment security, in which a bondholder (creditor or investor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time.
Generally, a bond issuer is expected to return the principal at maturity with an agreed upon interest to the bondholder, which is payable at fixed intervals.
Coupon bonds also known as bearer bonds can be defined as a debt instrument which typically has a coupon (detachable paper slip) attached to represent the periodic interest payments made semiannually or annually depending on the arrangement.
Basically, the bondholder normally receive these coupons (detachable paper slip) from the bond issuer within the period in which the bond was issued and its maturity.
Hence, coupon bonds are bonds with coupons (detachable paper slip) attached that represent periodic interest payments to be collected by the bondholder.
Explanation:
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Answer:
If nominal interest rate equals 5 percent and expected inflation is 3 percent, then the new nominal and real interest rates are respectively 5% and 2%.
Explanation:
The nominal interest rate is called the interest rate that is set by the bank and that will be added to the initial capital gradually according to the percentage established in the initially determined time. Thus, in the case, an annual interest of 5% is given, with which a deposit of $ 100 will rise to $ 105 after one year.
Now, the nominal interest rate may not represent real money growth. This is so because, due to inflation, a depreciation of the invested value occurs. Thus, for example, a deposit with an interest rate of 5% per year in a currency with inflation of 10% per year is losing 5% of its value during that year. In the case, since inflation is 3%, the real interest rate (that is, the real growth of investment) is 2%.
