第四章 债券及其估价 chapter4 Bonds and their valuation.ppt

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Ch4 Bonds and Their Valuation 4.3.1 Yield to Maturity Yield to Maturity: the annual rate of return of a bond held to maturity. It is the rate “kd” that makes : Vb=bond price * Ch4 Bonds and Their Valuation How to solve for YTM? Make clear the cash flow in (interests and principal)and cash flow out (buying price); Use the bond valuation formula but substitute Vb with bond price; Solve for “Kd” * Ch4 Bonds and Their Valuation Eg.1 What is the YTM on a 10-year, 9% annual coupon, $1,000 par value bond, selling for $887? Must find the kd that solves this model. * Ch4 Bonds and Their Valuation Using trial-and –error method Suppose kd=10%, VB=938.51887.00 Suppose kd=11%, VB=882.01887.00 So, * Ch4 Bonds and Their Valuation Eg. 2 Find YTM, if the bond price was $1,134.20. This bond sells at a premium, so YTM coupon rate. * Ch4 Bonds and Their Valuation Using trial-and –error method Suppose kd=8%, VB=1067.111134.2 Suppose kd=7%, VB=1140.421134.2 So, * Ch4 Bonds and Their Valuation 4.3.2 Yield to Call Yield to Call: the annual rate of return of a bond called before its maturity date. It is also the rate “kd” that makes : Vb=bond price * Ch4 Bonds and Their Valuation How to solve for YTC? Solving for the YTC is identical to solving for YTM, except the time to call is used for N and the call price substitute for M. * Ch4 Bonds and Their Valuation Eg:A 10-year, 10% annual coupon, $1,000 par value bond selling for $1,135.90 can be called in 4 years for $1,050, what is its yield to call (YTC)? * Ch4 Bonds and Their Valuation If the bond will not be called: YTM=8.02% * Ch4 Bonds and Their Valuation How about YTM or YTC of bonds with semiannual coupon? Eg: P.168 4-2 Solve for YTM 1100=40*PVIFA(KPER,20)+1000*PVIF(KPER,20) KPER=3.33% YTM=2* KPER =6.66% 0 1 2 2*10=20 Kper=YTM/2 40 40 + 1,000 40 -1100 ... * Ch4 Bonds and Their Valuation (2)Solve for YT