keep_running
New member
- Jan 5, 2016
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Lets say that a bond has face valeu of $1000 at CPI = 200 and 4% annual coupon rate.
Then, the CPI on the bonds drops to 150. How come the coupon payment will fluctuate, but the principal payment will stay above the $1000?
It seems that coupon payments move completely with CPI on these types of bonds, but principal payments do not drop below the minimum of $1000.
Why is this the case?
Then, the CPI on the bonds drops to 150. How come the coupon payment will fluctuate, but the principal payment will stay above the $1000?
It seems that coupon payments move completely with CPI on these types of bonds, but principal payments do not drop below the minimum of $1000.
Why is this the case?