4章 Bonds and Their Valuation 学习课件，财务管理英文版.ppt

Topic 6(Chapter 4)Bonds and Their Valuation Key features of bonds Bond valuation Measuring yield Assessing risk Define the Bond Bond is a long-term contract under which a borrower agrees to make payments of interest and principle, on specific dates, to the holders of the bond. Types of Bonds Treasury bonds Corporate bonds Municipal bonds Foreign bonds U.S. Treasury Yield Curve 3:08 AM 9/9/2009 Key Features of a Bond Financial Asset Valuation Bond Valuation The discount rate (kd) is the opportunity cost of capital, i.e., the rate that could be earned on alternative investments of equal risk. What’s the value of a 10-year, 10% coupon bond if kd = 10%? What would happen if inflation fell, and kd declined to 7%? Example MicroDrive’s bonds with a 10 percent coupon rate were originally issued at par $1,000 with 15-year maturity. If remain constant at 10 percent, what would the value of the bond be one year after it was issued? Now suppose interest rates in the economy fell after the Allied Bonds were issued,and ,as a result, fell below the coupon rate, decreasing from 10 to 5 percent. Assuming that interest rates remain constant at 5 percent for the next 14 years,what would happen to the value of an MicroDrive bond? Bonds value at year 1 and year 2 after they were issued: So, the bond value would first increase to its highest value of $1,494.96(first year), and then would decrease from $1,469.66 (Second year) to $1,000 (the last year). Now suppose interest rates in the economy had risen from 10 to 15 percent during the first year after issue,what would happen to the value of an MicroDrive bond? Bonds value at year 1 and year 2 after they were issued: So, the bond value would first decrease to its lowest value of $713.78(first year), and then would increase from $720.80 (Second year) to $1,000 (the last year). Suppose the bond was issued 20 years ago and now has 10 years to maturity. What would happen to its value over time if the required rate of return rema