L10_3710_new

L10_3710_new - Ch10. Bond Price and Yield Introduction to...

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1 Investment Analysis: Prof. Peng 1 Ch10. Bond Price and Yield Introduction to Debt Markets Pricing Yield Municipal bond Yield Curve Investment Analysis: Prof. Peng 2 Debt: Definition A security obligating issuer to pay interest and principal to the holder on specified dates. Coupon rate, e.g. 8% Face/par value or Principal amount, e.g. $1,000 Maturity, e.g. 30 year e.g. Cash flow for a 30yr Treasury bond with the above features Semiannual coupon payment: 8%/2*1,000=$40 In addition, at the end of the 30 th year, principle payment of $1,000.
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2 Investment Analysis: Prof. Peng 3 Debt Classes: U.S.Treasuries Treasury Bills maturity 1 year when issued, pure discount bond (zero-coupon bond) no coupon payments prior to maturity. bond’s face value paid at maturity. Treasury Notes Maturity: 1 year maturity 10 years when issued Coupon: semi-annual Treasury Bonds: Maturity: >10 years when issued Coupon: semi-annual Investment Analysis: Prof. Peng 4 Debt Classes: Corporate Bonds Some features of corporate bonds Convertible bonds: holder’s right to convertible to equity Callable bonds: issuer’s right to buys back bond Putable bonds: holder’s right to sell bond to issuer Floating rate bonds: coupon rates reset according to a market rate
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3 Investment Analysis: Prof. Peng 5 Pricing Discounted Cash Flow Approach Identify coupon and principal cash flow
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L10_3710_new - Ch10. Bond Price and Yield Introduction to...

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