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You spend days wandering aimlessly around a park with many different paths that end at different parts of the park. One day when you arrive at the park, you get a call on your cell phone from your cousin whom you haven't seen for years, and she says she is waiting for you in a particular section of the park. Even though the paths are complicated and twisted, you manage to find the shortest route to your cousin. Tolman would explain your efficient passage through the park as an example of
Yield to Maturity
The total return anticipated on a bond if it is held until the maturity date, factoring in the current price, par value, coupon yield, and time to maturity.
Coupon Rate
Each year, the interest rate a bond yields, expressed in terms of the percentage of its face value.
Premium
A premium is the amount by which the price of a security or financial instrument exceeds its intrinsic or face value.
Indenture
A legal contract specifying the terms and conditions of a bond or loan, including interest rates, repayment schedule, and other obligations.
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