BondPriceonanInterestPaymentDate幻灯片.pptVIP

Chapter 15BONDS AND SINKING FUNDS;Dependence of Bond Price On Prevailing Interest Rate;Summary:;2. Bond prices move in a direction opposite to the change in the market rate. If prevailing interest rates decline, bond prices rise. If prevailing interest rates rise, bond prices fall.;Calculating A Bond’s Price on an Interest Payment Date; F=Face value of the bond b=Coupon rate per interest payment interval (normally 6 months) P=The bond market’s required rate of return per interest payment interval n=Number of interest payments remaining until the maturity date The semiannual interest payment is Fb.;| | | | |;Tip: The bond’s coupon rate is used only to determine the size of the periodic interest payments. The prevailing market rate of return is used to discount the future payments when calculating the bond’s price.;Example A $5000 face value bond has a coupon rate of 11% and a maturity date of March 1, 2008. Interest is paid semiannually. On September 1, 1992, the prevailing interest rate on long-term bonds abruptly rose from 8% to 8.25% compounded semiannually. What were the bond’s prices before and after the interest rate change? ;Solution: F=$5000 b=11%/2=5.5%;;Step 2: Calculate the selling price F=$1000 b=4% n=(9?-2?)×2=14 p=8.5%/2=4.125% Fb=$40;Step 3: Capital gain=($974.02-$879.15) ×10=$948.70;Bond premium = Bond price – Face value when b p Bond discount = Face value – Bond price when b p