430 cheat sheet - For floating rate notes coupon will be...

Info icon This preview shows page 1. Sign up to view the full content.

For floating rate notes : coupon will be reset for next period’s payment. ie: coupon rate reset on Jan 2013 will be paid on Jun 2013. Example from slides: First coupon: 3 month LIBOR + 24 bps = 0.29+0.240 = 0.0053 or 0.53% This an annual rate , Interest received on $1,000 = 0.53% x $1,000 x 89 days/360 days = $1.31 (US convention) Bond valuation: ( 29 n t n T r principal r cpn P ) 1 ( 1 1 + + + = = ( 29 + - + y y C n 1 1 1 : Payments Coupon the of Value Present Coupon Rate <Yield required by the market, therefore Price < Par Value, Bond is trading at a discount (to face value) In Canada :Government Bonds: Use Actual/Actual days convention, Corporate bonds use Actual/365 convention In the US : Treasury bonds: Use Actual/Actual like Canada. For agency, municipal and corporate bonds, 30/360 Bond Equivalent Yield (BEY): effective annual yield ie: –Semi annual coupon on a new 5 year bond 5.50% 1 1 - + = m s effective m r r 1 1 - + = f m s period per m r r ie: Yield to First Call - is computed for an issue that is not currently callable. Yield to Next Call - is computed for an issue that is
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.
  • Spring '12
  • tolias

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    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.

    Student Picture

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

  • Left Quote Icon

    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.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    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.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern