Bond Yields - Bond Yields FixedIncomeSecurities Outline

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Bond Yields Fixed Income Securities
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Outline Sources of Return for a Bond Investor Measures of Return/Yield Nominal Yield Current Yield Yield to Maturity Impact of Reinvestment Assumption Yield to Maturity for a Zero Coupon Bond Yield to Call and the Yield to Worse Yield Measures of a Portfolio of Bonds Yield Measure for a Floating Rate Security Total Return 
Background image of page 2
Sources of Bond Return Three sources of return: Periodic coupon interest payments Any capital gain (or capital loss)) when the  bond matures or is called back or is sold Income from reinvestment of the periodic  coupon interest Any measure of bond yield should be  based on the above three potential  sources of return
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Nominal Yield Nominal yield of a bond is the coupon  rate on the bond A bond with 8 percent coupon has a 8%  nominal yield Does not consider capital gain or capital  loss  Does not consider reinvestment income
Background image of page 4
Current Yield Current yield relates the annual coupon  interest to the current market price of  the bond Considers only coupon interest income Does not consider capital gain or loss Does not consider reinvestment income                            
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Yield to Maturity Also called the internal rate of return of a  bond The interest rate that will make the present  value of the cash flows equal to the price (or 
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/03/2009 for the course FIN 4243 taught by Professor Dudley during the Spring '08 term at University of Florida.

Page1 / 17

Bond Yields - Bond Yields FixedIncomeSecurities Outline

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online