CHAPTER 8 Bonds and Their Valuation课件.pptVIP

CHAPTER 7Bonds and Their Valuation Updated: *;What is a bond?;Bond markets;Key Features of a Bond;Effect of a call provision;What is a sinking fund?;How are sinking funds executed?;The value of financial assets;Other types (features) of bonds;What is the opportunity cost of debt capital?;What is the value of a 10-year, 10% annual coupon bond, if rd = 10%?;Using a financial calculator to value a bond;The same company also has 10-year bonds outstanding with the same risk but a 13% annual coupon rate;The same company also has 10-year bonds outstanding with the same risk but a 7% annual coupon rate;Changes in Bond Value over Time;Bond values over time;What is the YTM on a 10-year, 9% annual coupon, $1,000 par value bond, selling for $887?;Using a financial calculator to solve for the YTM;Find YTM, if the bond price is $1,134.20;Definitions;An example: Current and capital gains yield;Calculating capital gains yield;What is interest rate (or price) risk? Does a 1-year or 10-year bond have more interest rate risk? ;Illustrating interest rate risk;What is reinvestment rate risk?;Reinvestment rate risk example;Conclusions about interest rate and reinvestment rate risk;Semiannual bonds;What is the value of a 10-year, 10% semiannual coupon bond, if rd = 13%?;Would you prefer to buy a 10-year, 10% annual coupon bond or a 10-year, 10% semiannual coupon bond, all else equal?;If the proper price for this semiannual bond is $1,000, what would be the proper price for the annual coupon bond?;A 10-year, 10% semiannual coupon bond selling for $1,135.90 can be called in 4 years for $1,050, what is its yield to call (YTC)?;Yield to call;If you bought these callable bonds, would you be more likely to earn the YTM or YTC?;When is a call more likely to occur?;Default risk;Types of bonds;Evaluating default risk:Bond ratings;Factors affecting default risk and bond ratings;Other factors affecting default risk;Bankruptcy;Chapter 11 Bankruptcy;Priority of claims in liquidation;Reorganiza