Chap006.ppt - Valuing Bonds A bond is a debt instrument...

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6- 6-2 Valuing Bonds A bond is a debt instrument issued by governments or corporations to raise money The successful investor must be able to: Understand bond structure Calculate bond rates of return Understand interest rate risk Differentiate between real and nominal returns
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6- 6-3 Bond Basics When governments or companies issue bonds , they promise to make a series of interest payments and then repay the debt. Bond Security that obligates the issuer to make specified payments to the bondholder. Face Value (Par value) 面值 Payment at the maturity of the bond. Coupon 票面利息 The interest payments paid to the bondholder. Coupon Rate 票面利率 Annual interest payment as a percentage of face value.
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6- 6-4 Bond Pricing: Example Treasury bond prices are quoted in 32nds rather than in decimals. For a $1000 face value bond with a bid price of 103:05 and an asked price of 103:06, how much would an investor pay for the bond? 6 103% 103.1875% 32 1.031875 $1,000 $1,031.875 of face value
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6- 6-5 Bond Pricing 1 2 ( ) ....
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