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KIC000064 - Chapter 8 Bond Valuation and Risk mat-um mun-nu...

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Unformatted text preview: Chapter 8 Bond Valuation and Risk mat-um mun-nu wmwmmJ-umdM—t—m. "vii—d Chapter Outline I Bond valuation process I Relationships between coupon rate. required return. and bond price I Explaining bond price movements I Sensitivity of bond prices to interest rate movements I Bond investment strategies used by investors I Return and risk of international bonds Bond Valuation Process I Bonds: a Are debt obligations with long—term maturities issued by government or wporaliene to obtain long-term funds a Are commonly purmesed by financial institutions that wish to investlor long-term periods I The appropriate bond price reflects the present value of the cash flows generated by the bond (Le. interest payments and repayment of principal): C C C + Par (1+k)1 + (1+ k)” +""(1+ k)” PV of bond = ...
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