Corporate finance tri vi dang columbia university

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Unformatted text preview: sh flow stream (infinite annuities or perpetuities) PV C r. Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 23 Question 2 Are there real world examples of such an instrument? Answer 2 - British consuls (government bond) - Trust Preferred Securities We will discuss the benefits of this type of securities in Section I.3. Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 24 Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 25 Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 26 I.1.B. Bond pricing, yields and the term structure of interests Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 28 Remark - A Bond is a cash flow stream with pre-specified payments: - Coupon payments and final payment Terminology The final payment (net coupon) is called the face value of the bond Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 29 Example 1 Government bond Suppose there is no default of payments Payment dates: 1 2 3 4 5 6 Payment $10 $10 $10 $10 $10+$100 $10 Terminology The coupon payments of 10 is called a 10% bond. Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 30 The price of this bond Suppose the riskless rate is 4% per year and constant 5 PV t 1 10 110 131.45 6 t (1 r ) (1 r ) Corporate Finance, Tri Vi Dang, Columbia University, Fall 2013 31 Terminology Given the price of the bond 10 110 PV t1 (1 y ) t (1 y ) 6 ....
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This document was uploaded on 02/16/2014 for the course ECON w4280 at Columbia.

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