Traditional bond

Identify the following:

a. Traditional bond a bond with both a regular interest coupon and a final maturity value.

b. Par bond a bond selling at its maturity value (because the bond’s coupon rate equals investors’ required rate of return).

c. Discount bond a bond selling at less than its maturity value (because investors’ required rate of return has risen above the bond’s coupon rate).

d. Premium bond a bond selling at more than its maturity value (because investors’ required rate of return has fallen below the bond’s coupon rate).

e. Zero-coupon bond a bond with no regular interest coupon but only a final maturity value.

f. Perpetual bond a bond with an infinite life so it effectively has no final maturity value but only a regular interest coupon.