Interest Rate And Bond Valuation Chapter 6 Ppt To Pdf

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In finance , a bond is an instrument of indebtedness of the bond issuer to the holders.

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Note: Your browser must support JavaScript in order to use this quiz. More than its face value. Less than its face value. If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion?

Chapter 6 Interest Rates and Bond Valuation

This web page is designed to support "Investment Valuation", the second edition. The publisher is John Wiley and Sons. You can navigate the site by either going to individual chapters and getting supporting material by chapter, or by going to the supporting material directly. The supporting material includes:. Illustration 3. Illustration 4.

Booth Cleary 2nd Edition Chapter 6 - Bond Valuation and Interest Rates

The curve may reflect a general expectation for an economic recovery due to inflation coming under control and a stimulating impact on the economy from the lower rates. Treasury issues is upward sloping, reflecting the prevailing expectation of higher future inflation rates. The dashed line in the part c graph shows what the curve would look like without the existence of liquidity preference, ignoring the other yield curve theories. Forces which may be responsible for a change in the real rate of interest include changing economic conditions such as the international trade balance, a federal government budget deficit, or changes in tax legislation. Two years ago, the yield curve was downward sloping, reflecting lower expected interest rates due to a decline in the expected level of inflation. Today, the yield curve is upward sloping, reflecting higher expected inflation and higher future rates of interest. This yield represents the expected compounded rate of return the investor would earn if the bond is purchased at the price quoted and the bond is held until the maturity date.

To calculate the dollar value of the annual coupon, multiply the coupon rate times the face value. Higher coupon rate causes value above par Price above par value, called a premium bond 6 - 24 Using the Approximation Formula to Solve for Yield to Maturity Bond Valuation and Interest Rates 6 - 26 The Approximation Formula This formula gives you a quick estimate of the yield to maturity It is an estimate because it is based on a linear approximation again you will remember the exponential nature of compound interest Should you be concerned with the error inherent in the approximated YTM? NO Remember a YTM is an ex ante calculation as a forecast, it is based on assumptions which may or may not hold in this case, therefore as a forecast or estimate, the approximation approach should be fine. Always assume the coupon interest is paid semi-annually. Short-Term Interest Rates Bond Valuation and Interest Rates 6 - 31 Interest Rate Determinants Interest is the price of money Interest rates go: Up when the demand for loanable funds rises Down when the demand for loanable funds falls Term Structure of Interest Rates Long-term Interest Rates Bond Valuation and Interest Rates 6 - 33 Term Structure of Interest Rates Term structure is the relationship between time to maturity and yields, all else equal Yield curve graphical representation of the term structure Normal upward-sloping; long-term yields are higher than short- term yields Inverted downward-sloping; long-term yields are lower than short-term yields When plotted on a graph, the line is called a Yield Curve 6 - 34 Figure 7.

Basic Structure of Bonds 2. Bond Valuation 3. Bond Yields 4. Interest Rate Determinants 5. Other Debt Instruments Bond Basics Valuation Yields Determinants Other Debt Learning Objectives The basic features of different types of bonds How to value bonds given an appropriate discount rate How to determine the discount rate or yield given the market value of a bond How market interest rates or yields affect bond investors How bond prices change over time The factors both domestic and global that affect interest rates Bond Basics Valuation Yields Determinants Other Debt Basic Structure of Bonds The Basic Structure of Bonds What is a bond? Today is July 15 th. The last coupon was paid June 30 th.


The term structure of interest rates and the determinants of bond yields. Chapter Outline. Bonds and Bond Valuation. More on Bond Features. Bond.


Chapter 6 - Bond Valuation and Interest Rates

Key concepts and skillsKnow the important features and different types of bills and bondsUnderstand how bills and bonds are valued and why they fluctuateUnderstand bond ratings and what they meanUnderstand the impact of inflation on interest ratesUnderstand the term structure of interest rates and the determinants of bond yields. Slides prepared by David E. Allen and Abhay K.

Embed Size px x x x x LG2 Review the legal aspects of bond financing and bond cost. LG3 Discuss the general features, yields, prices, popular types, and international issues of corporate bonds. LG4 Understand the key inputs and basic model used in the valuation process. LG5 Apply the basic valuation model to bonds and describe the impact of required return and time to maturity on bond values.

Bond (finance)

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Chapter 10 Bond Prices and Yields

Фонтейн сурово взглянул на. Уж о чем о чем, а о стрессовых ситуациях директор знал. Он был уверен, что чрезмерный нажим не приведет ни к чему хорошему. - Расслабьтесь, мистер Беккер. Если будет ошибка, мы попробуем снова, пока не добьемся успеха. - Плохой совет, мистер Беккер, - огрызнулся Джабба.  - Нужно сразу быть точным.

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Это избирательный цикл. Иными словами, это червь со своими пристрастиями. Бринкерхофф открыл рот, собираясь что-то сказать, но Фонтейн движением руки заставил его замолчать. - Самое разрушительное последствие - полное уничтожение всего банка данных, - продолжал Джабба, - но этот червь посложнее. Он стирает только те файлы, которые отвечают определенным параметрам. - Вы хотите сказать, что он не нападет на весь банк данных? - с надеждой спросил Бринкерхофф.

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