Chapter 7 商业法.pptVIP

Interest Rates and Bond Valuation Key Concepts and Skills Know the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean Understand the impact of inflation on interest rates Understand the term structure of interest rates and the determinants of bond yields Chapter Outline Bonds and Bond Valuation More on Bond Features Bond Ratings Some Different Types of Bonds Bond Markets Inflation and Interest Rates Determinants of Bond Yields Bond Definitions Bond Par value (face value) Coupon rate Coupon payment Maturity date Yield or Yield to maturity Important Bond Terms Definition: A bond is a long-term debt instrument issued by a corporation or government. Basically, it is normally an interest-only loan, that borrower will pay the interest every period, but none of the principal will be repaid until the end of the loan. Important Bond Terms The Face Value of a bond: the amount that will be repaid at the end of the loan. In the case of a U.S. bond, the face value is usually $1,000. The bond’s Coupon Rate is annual coupon (interest payment) dividend by the face value Important Bond Terms The Coupon Payment is the stated interest payment made on a bond. The Maturity Date of a bond: is the time when the company is obligated to pay the bondholder the face value of the bond. Important Bond Terms Yield to maturity (YTM): the rate required in the market on a bond is commonly referred to as the bond’s yield to maturity. Yield To Maturity (YTM): is the expected rate of return on a bond if bought at its current market price and held to maturity. Coupon Bond Example 6.1 Suppose the Xanth Co. were to issue a bond with 5 years to maturity. The bond has a 8% annual coupon, similar bonds have a yield to maturity of 8%, what would this bond sell for? Coupon Bond Example 6.1 Coupon Bond Example 6.1 Bond Value = PV of coupons + PV of par Bond Value = PV of annuity + PV of lump sum Total bond value = 80*