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Unformatted text preview: ipal Is there a closed-form expression for this sum?
Yes: the diﬀerence between a perpetuity today and a perpetuity
N /2 years forward. Fixed Income I: R. J. Hawkins Econ 136: Financial Economics 14/ 19 Price-Yield Relationships:
Bonds with a Round Number of Coupon Periods to Maturity The bond formula:
Pbond = C
100 − C /Y
(1 + Y /2)N Implications:
1 If the yield equals the coupon the bond price is equal to par. 2 If the yield is less than the coupon the bond price is greater
than par. 3 If the yield is greater than the coupon the bond price is less
than par. 4 Bond prices move inversely to bond yields. Fixed Income I: R. J. Hawkins Econ 136: Financial Economics 19/ 19 Fixed-Income Analytics
Cash ﬂows, discount factors and interest rates. 1.2 Principal ($)
Interest Rate 1
0 1 2
TENOR (years) Fixed Income III: R. J. Hawkins 4 Econ 136: Financial Economics 5 5/ 24 The Term Structure of Interest Rates
We begin with bond prices. Treasury Bond Prices for 0...
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This note was uploaded on 01/23/2014 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.
- Fall '08