Bond Prices

Bond Prices - Bond Prices The market sets bond prices...

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Bond Prices 1 The market sets bond prices through the competitive process between market participants (buyers and sellers). Prices are based on a variety of risk factors and are market-determined r = RR + IP + DP + MP + LP + EP + TP YTM and price and co-determined.
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Yield To Maturity With a premium bond , at maturity the investor will only get paid the face value even though they paid a premium over par. There is a built-in capital loss. $1,000 - $1,268.27 = -$268.27 Using the example in an earlier 2
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Yield To Maturity For a discount bond , the investor will get paid the full face value even though they bought it at a discount from par. There is a built-in capital gain . The capital gain realized at the time the bond matures results in an overall yield equal to the required rate of return. 3
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Yield To Maturity “The yield to maturity is the interest rate that makes the present value of the bond’s cash flows equal to its price.” The YTM is dependent on market, economic, and company-specific
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Bond Prices - Bond Prices The market sets bond prices...

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