L13-Bond Prices and Yields _Compatibility Mo

L13-Bond Prices and Yields _Compatibility Mo - Investment...

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Unformatted text preview: Investment Analysis Investment Analysis HKUST- FINA 3104 Chapter 14 Bond Prices and Yields Entela Benz The Bond Price The Bond Price Definition efinition Bond features Bond features Types Types of Bonds of Bonds Bond pricing Bond pricing Clean versus Dirty Price Clean versus Dirty Price Pricing with the Financial Pricing with the Financial Calculator Calculator The Determinants of Bond Price The Determinants of Bond Price BOND PRICES AND YIELD The Determinants of Bond Price The Determinants of Bond Price The The time effect on bond price time effect on bond price The The yield effect on bond yield effect on bond price price Conventional Yield Measures Conventional Yield Measures 11/1/2011 HKUST-Investment Analysis 2 The Bond Price Definition • A bond is a security that obliges the issuer (the borrower) to make specific payments to the holder (the lender) over a period of time. 11/1/2011 HKUST-Investment Analysis 3 $96.53 $100+$5 $5 $5 $5 Settlement date Maturity date o The principal amount : The total amount of money raised by the issuer. o The par value (face value): The payment to the bondholder at the maturity of the bond. The Bond Price Bond Features o The maturity: It is the pay back date of the principal amount to the bondholder. o The coupon: The coupon levels depends on the general level of interest rate as well as the credit quality of the borrower. o The issue price: It depends on the demand for that bond. It is a percentage of the par value. o Denominations: either 100 or 1000usd 11/1/2011 HKUST-Investment Analysis 4 Issuer Principal amount Currency Trade date U.K. Treasury GBP 13.250mio GBP 5/14/2003 The Bond Price Bond Features Maturity date Coupon rate 1 st Coupon date Issue price Frequency Day Basis Ratings 11/1/2011 HKUST-Investment Analysis 5 3/7/2009 4% 9/7/2003 99.8200 S/A ACT/ACT Aaa/AAA Types of Bonds o Eurobond – A bond that is denominated in one currency, usually that of the issuer, but sold in other national markets. o Zero-coupon bond – A bond that makes no coupon payments. These bonds are issued at prices below par value. o Foreign bonds – the issuer is not domiciled in the country of issuance o Convertible bond – A bond that gives the bondholders an option to o Convertible bond – A bond that gives the bondholders an option to exchange the bond for a specified number of shares of common stock of the firm. o Indexed bond – A bond that makes payments that are tied to a general price index or the price of a particular commodity. EX, Inflation linked bonds o Callable bond – A bond which allows the issuer to repurchase the bond at a specified call price before the maturity date....
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L13-Bond Prices and Yields _Compatibility Mo - Investment...

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