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Coupon collector's problem. In probability theory, the coupon collector's problem refers to mathematical analysis of "collect all coupons and win" contests. It asks the following question: if each box of a given product (e.g., breakfast cereals) contains a coupon, and there are n different types of coupons, what is the probability that more ...
Duration (finance) In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price ...
In finance, a day count convention determines how interest accrues over time for a variety of investments, including bonds, notes, loans, mortgages, medium-term notes, swaps, and forward rate agreements (FRAs). This determines the number of days between two coupon payments, thus calculating the amount transferred on payment dates and also the ...
The daily portion of the discount uses a compounded interest formula with the principal recalculated every six months. The following table illustrates how to calculate the original issue discount for a $7,462 bond with a $10,000 repayment and a three-year maturity date: [2]
In finance, the dirty price is the price of a bond including any interest that has accrued since issue of the most recent coupon payment. This is to be compared with the clean price, which is the price of a bond excluding the accrued interest. Dirty Price = Clean Price + Accrued Interest. When bond prices are quoted on a Bloomberg Terminal ...
Time value of money problems involve the net value of cash flows at different points in time. In a typical case, the variables might be: a balance (the real or nominal value of a debt or a financial asset in terms of monetary units), a periodic rate of interest, the number of periods, and a series of cash flows. (In the case of a debt, cas
Accrued interest. In finance, accrued interest is the interest on a bond or loan that has accumulated since the principal investment, or since the previous coupon payment if there has been one already. For a type of obligation such as a bond, interest is calculated and paid at set intervals (for instance annually or semi-annually).
Grace period: Once a CD matures, the bank will give you some time to either withdraw your money or roll it into a new CD. Often, the grace period is between five and ten days. Often, the grace ...