Cheatsheet - Fixed Income Securities Zero coupon bond(pure...

This preview shows page 1 - 2 out of 2 pages.

Fixed Income SecuritiesZero coupon bond (pure discount bond):single fixed payment at maturity; PV = F/(1+r)t; assumes fixed market interest rateHPR = YTM if held to maturityYield to Maturity: discount rate that makes the sum of the discounted payments equal to the bond priceYTM = ; the “interest rate” imbedded into the price of a bond, used to compare bond investmentsReturn: (Vf– V0)/V0; a.k.a. percentage change of investment; only works with bonds w/ the same time to maturityHolding Period Return: ; return after t years, annualizedCoupon Bonds: coupon rate = C/F; YTM = r; sells at a premium(P > F) if YTM < C/Fsells at a discount(P < F) if YTM > C/Fsells at par(P = F) if YTM = C/FYTM = HPR if held to maturity and coupons reinvested at the YTMSemi-annual Bonds: coupon payments every 6 months; t = # year to maturity, r = YTM (or stated annual rate), C = coupon paymentPV = orPV = , where EAR = (1+r)2– 1Yield curve: graphical depiction of relationship between maturity (x-axis) and YTM (y-axis); a.k.a. term structureof interest rates

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture