文档介绍：Chapter 5
Valuing bonds
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Objectives
Distinguish among a bond’s coupon rate, current yield, and yield to maturity
Find the market price of a bond given its yield to maturity, find a bond’s yield given its price, and demonstrate why prices and yields vary inversely
Show why bonds exhibit interest rate risk
Understand why investors pay attention to bond ratings and demand a higher interest rate for bonds with low ratings
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Content
Bond characteristics
Interest rates and bond prices
Current yield and yield to maturity
Bond rates of return
The yield curve
Corporate bonds and the risk of default
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Bond: security that obligates the issuer to make specified payments to the bondholder
Coupon: the interest payments paid to the bondholder
Face value or principal: payment at maturity of the bond. Also called par value or maturity value
Coupon rate: annual interest payment as a percentage of face value
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Consider a . Treasury bond as an example. Several years ago, the . Treasury raised money by selling % coupon, 2008 maturity Treasury bonds. Each bond has a face value of $1000.
Suppose that in 2005 you decided to buy the % coupon bonds maturing in 2008. If you planned to hold the bond until maturity, the cash flows would be as follows:
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Coupon payment
Face value
Bond prices are quoted in 32nds rather than decimals
. 105:32 means that the price is 105 and 23/32, or %, therefore each bond costs $
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Bond: 债券
Coupon: 息票
Face value or par value : 面值
Principal:本金
Maturity value: 到期值
Coupon rate: 票面利率
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Content
Bond characteristics
Interest rates and bond prices
Current yield and yield to maturity
Bond rates of return
The yield curve
Corporate bonds and the risk of default
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How much would you have been willing to pay for the bond?
The value of a security is the present value of the