Professional Documents
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Bond Characteristics
Coupon rate
Zero coupon bond
payments
Accrued Interest
U.S. Treasury
Notes and Bonds
Corporations
Municipalities
International Governments and Corporations
Innovative Bonds
Indexed Bonds
Floaters
Provisions of Bonds
Secured or unsecured
Call provision
Convertible provision
Sinking funds
Bond Prices & Yields
PB
PB =
Ct =
ParValue
T
C
t
T
t
(1 rt )
t 1 (1 rt )
Ct= 40 (SA), P
20
1
1
+ 1000 __________
P B = 40 __________
t
t=1 (1+.03)
(1+.03) 20
PB = $1,148.77
Discount Rate
Yield to Maturity
ParValue
T
C
t
PB
T
t
(1 r )
t 1 (1 r )
35 1000
950
T
t
(1 r )
t 1 (1 r )
20
r = 3.8635%
Yield Calculations
7.72% = 3.86% x 2
(1.0386)2 - 1 = 7.88%
Current Yield
HPR = [ I + ( P0 - P1 )] / P0
where
I = interest payment
P1 = price in one period
P0 = purchase price
Holding-Period Example