MGMT310_lecture15

MGMT310_lecture15 - Announcements Announcements...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
nnouncements Announcements Exam tomorrow: Tues. March 9 Time: 8:00–9:30 pm Section 2 (i.e., 1:30 class), go to FRNY G140 Sections 3 & 4 (i.e., 3:00 and 4:30 classes), go to PHYS 112 I will hold extended office hours today (6:00 pm to 10:00 pm) NO CLASS on Wed. March 10
Background image of page 1

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

View Full DocumentRight Arrow Icon
xam reminders Exam reminders You may only bring pen/pencil and a calculator (no sharing!!) Seating arrangement: every other seat Do not open exam until it’s officially started Please be easy on the grader. Round your interim work and final answers at least to the nearest three decimal places (remember: w/ compounding, rounding errors blow up!!). Show your work where applicable. Review syllabus for policy on academic dishonesty
Background image of page 2
ond review Bond review Consider: 10% coupon bond with face value of $1000, maturing in five years, ytm = 8%, and coupons paid semi annually (assume semi annual coupon was *just* paid) Recall some bond terms: face value, time to maturity, coupon rate, current yield, yield to maturity, effective annual yield, duration Premium, discount, or par value bond When provided the price and coupon rate of a T year coupon bond, only way to find ytm is through brute force (keep guessing until it works out) e can however know whether tm > = or < the coupon rate We can, however, know whether ytm is >, , or < the coupon rate    T T F 1 1 r Price = C + 1+r      = PV of coupons + PV of face val e r u 
Background image of page 3

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

View Full DocumentRight Arrow Icon
ro coupon bonds Zero coupon bonds Consider: zero coupon bond with face value of $1000, maturing in three years, priced at $750. No interim coupon payments (just the face value payment made at maturity): Price = PV(face value) lso called pure discount bonds Also called pure discount bonds Can directly calculate ytm (no guesswork required) Spot rate = ytm on zero coupon bond
Background image of page 4
ctors that affect bond prices Factors that affect bond prices Expected inflation ominal rate How much is cost of goods generally increasing Real rate of interest ow much is your real buying power increasing Nominal rate rate at which your $$ increases = (1 + inflation) * (1 + real) 1 How much is your real buying power increasing Interest rate risk Some bonds more sensitive to fluctuations in interest rates Default risk Might not get $$ you were promised Tax considerations Bonds aren’t taxed equally Liquidity
Background image of page 5

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

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/31/2011 for the course MGMT 310 taught by Professor Matthewjamesbarcaskey during the Spring '08 term at Purdue.

Page1 / 19

MGMT310_lecture15 - Announcements Announcements...

This preview shows document pages 1 - 6. Sign up to view the full document.

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