Lecture4Bonds.SPR2011 (1)

Lecture4Bonds.SPR2011 (1) - Lecture 4: Valuing Financial...

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Lecture 4: Valuing Financial Assets: Bonds ©
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Bond Valuation The value of any asset is the present value of all the future income that the owner of the asset will receive. Price/Intrinsic Value= t = 1 IncomeinPeriodt 1 + appropriatediscount rateinperiodt t
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What is a bond? A security that promises to pays a specified series of payments at specified intervals. Examples: Treasury Bills Treasury Notes and Treasury Bonds TIPS Munis Corporate Bonds Mortgage Backed Securities
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Bond Terminology
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Classifying Bonds: By cash flows: Pure Discount: T-bills, Zeros Coupon Bonds: T-notes, T-bonds, Corporate bonds Annuities: Mortgage based Securities By Issuing Agency: Government Bonds Corporate Bonds Municipalities
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The Chart shows the appreciation in value of a $10,000 zero, purchased on January 1, 2010. The bond matures on December 31st, 2029. At an issue yield of 4.2%, the bond is priced at $4323. Q: What happens to the price of the
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This note was uploaded on 02/28/2011 for the course FIN 300 taught by Professor Olander during the Spring '08 term at ASU.

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Lecture4Bonds.SPR2011 (1) - Lecture 4: Valuing Financial...

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