{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture10

# Lecture10 - D=Discount F=100 Y=Asked/100 t=Days • Yield...

This preview shows pages 1–14. Sign up to view the full content.

Lecture 10 : Debt Markets and Term Structure Economics 252, Spring 2008 Prof. Robert Shiller, Yale University

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Discount Bonds Pricing Term T, Yield to Maturity (YTM) r

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Compound Interest If annual rate is r, compounding once per year, balance = (1+ r ) t after t years. If compounded twice per year, balance is (1 + r /2) 2 t after t years. If compounded n times per year, balance is (1+ r / n ) nt after t years. Continuous compounding, balance is e rt .
Price & Yield on T-Bills For buyer, Price = 100-Discount Discount = Asked*(Days to Maturity/360). (Same as formula on page 295 of Fabozzi, where

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: D=Discount, F=100, Y=Asked/100, t=Days) • Yield = (Discount/Price)(365/(Days to Maturity)). (Unless maturity > 6 months, in which case quadratic formula using semi-annual compounding is required.) Conventional Bonds Carry Coupons • Conventional Bond Issued at par (100), coupons every six months. • Term is time to maturity. Forward Rates J. R. Hicks Value and Capital 1939 Inflation and Interest Rates • Nominal rate quoted in dollars, real rate quoted market baskets • Nominal rate usually greater than real rate....
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern