PPT-Bond Prices and Yields 10

Bodie Kane and Marcus Essentials of Investments 9 th Edition 101 Bond Characteristics Bond Security that obligates issuer to make payments to holder over time Face Value Par Value Payment to bondholder at maturity of bond. 0. 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 11. Learning Objectives. Understand interest rate risk and the key bond pricing relation. Compute and understand the valuation implications of:. Duration . Modified Duration, and . Convexity of a bond portfolio. Lecture 11. Treasury Futures. Topics. Pricing. Delivery. Complications for both. Multiple assets can be delivered on the same contract…unlike commodities. The deliverable assets all have different prices. . Stock Valuation is an Art not a Science. Economic drivers . of stock value. Fundamental analysis . based on accounting information. Technical analysis . based on price patterns. 2. The Economics of Stock Value. Bond . Cash Flows, Prices, . and Yields. Bond Terminology. Face Value. Notional amount used to compute the interest payments. Coupon Rate. Determines the amount of each coupon payment, expressed as an . As interest rates change, the value of existing bonds go either up or down. . If interest rates increase, the value of bonds sold at lower interest rates decline in value.. If interest rates decline, the value of bonds sold at higher interest rates increase in value. . Professor Laurence Booth. CIT Chair in Structured Finance. Rotman School of Management. University of Toronto. Overview. Can not . mechanically. do much in finance. Markets constantly changing. History “constrains” reasonable values. www.lancaster.ac.uk/postgrad/alia10/. s.murphy5@lancaster.ac.uk. office . hours: . 3:00PM . to . 4:00PM Monday LUMS . C85. Exam 4 Next Week. 40 Multiple Choice Questions. 28 from Gerry Steele. Mostly theory . Campbell R. Harvey. Fuqua School of Business. Duke University. charvey@mail.duke.edu. http://www.duke.edu/~charvey. Definition of a Bond. A . bond . is a security that obligates the issuer to make specified interest and principal payments to the holder on specified dates.. O’BRIEN. Money,. Banking, and. the Financial System. Interest Rates and Rates of Return. C H A P T E R. 3. 3.1. 3.2. 3.3. Explain how the interest rate links present value with future value. LEARNING OBJECTIVES. O’BRIEN. Money,. Banking, and. the Financial System. Interest Rates and Rates of Return. C H A P T E R. 3. 3.1. 3.2. 3.3. Explain how the interest rate links present value with future value. LEARNING OBJECTIVES. LAST WEEK IN REVIEW.  .  . The major indexes moved higher last week, hitting new intraday highs on Thursday before a Friday pullback. Communication services shares led the gains in the S&P 500 Index, boosted by a sharp gain in Netflix shares following its report of surprisingly large subscriber gains in the fourth quarter. Facebook and Google's parent company, Alphabet, were also strong, as were video-gaming stocks. On the other hand, energy shares lagged as oil prices fell back on a surprising rise in US inventories and the rollback of the Keystone Pipeline (a major energy infrastructure project). As fast-growing technology-related stocks led the gains, the market's recent rotation into small-caps and value stocks reversed, at least temporarily. Trading volumes remained exceptionally high, reflecting, in part, heavy participation by individual investors. The market was closed last Monday in observation of Martin Luther King Jr. Day.. Chapter 5. Kidwell, Blackwell, . Whidbee. and . Sias. 10/10/17. Chapter 5 Kidwell, Blackwell, Whidbee & Sias. 1. The Time Value of Money. Investing—in financial assets or in real assets—means giving up consumption until later.. The Fundamentals of Bond Valuation. The Present Value . Model. . where:. . P. m. =the current market price of the bond. n. = the number of years to maturity. . C. i. . = the annual coupon payment for bond .