货币金融学英文课件Lecture 3.pptVIP

Chapter 4 Understanding Interest Rates Money has time value ! A dollar ( $1) paid today has a higher value than a dollar paid in future Money can be used to invest therefore gain more money in the future The purchasing power of money will change in light of the inflation rate Discounting the Future Present Value The concept of PV is extremely useful because it allows us to figure out today’s value of debt market instrument This information in turn allows us to compare the value of two different instruments with different timing of their payments Yield to Maturity The rate that equates the present value of cash flow payments received from a debt instrument with its value today Simple Loan Fixed Payment Loan To calculate the yield to maturity , we equate today’s value of the loan with its present value. Because the fixed-payment involve more than one cash flow payment, the present value of the fixed-payment loan is calculated as the sum of the present values of all cash flow payment. Fixed Payment Loan Exercise You need a $100,000 mortgage. You take out a loan which has an interest rate of 8%, what is the yearly payment to the bank to pay off the loan in twenty years? R=8%, LV=100,000, n=20 Coupon Bond Equate today’s value of bond with its present value The present value of the bond is calculated as the sum of present values of all the coupon payment plus the present value of the final payment of the face value of the bond Coupon Bond Exercise Find the price of 10% coupon bond with a face value of $1000, a 15% yield to maturity , and 8 years to maturity FV=1000, c=10% , r=15%, n=8 , LV=? When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate The price of a coupon bond and the yield to maturity are negatively related The yield to maturity is greater than the coupon rate when the bond price is below its face value Consol or Perpetuity A bond with no maturity date that does not repay principal but pays fixed coupon p