chapter_24valuingdebt(公司金融).pptVIP

Slides by Matthew Will Topics Covered The Classical Theory of Interest Duration and Volatility The Term Structure and YTM Explaining the Term Structure Allowing for the Risk of Default Valuing a Bond Valuing a Bond Valuing a Bond Bond Prices and Yields Debt Interest Rates Classical Theory of Interest Rates (Economics) developed by Irving Fisher Debt Interest Rates Classical Theory of Interest Rates (Economics) developed by Irving Fisher Nominal Interest Rate = The rate you actually pay when you borrow money Debt Interest Rates Classical Theory of Interest Rates (Economics) developed by Irving Fisher Nominal Interest Rate = The rate you actually pay when you borrow money Real Interest Rate = The theoretical rate you pay when you borrow money, as determined by supply and demand Debt Interest Rates Nominal r = Real r + expected inflation Real r is theoretically somewhat stable Inflation is a large variable Q: Why do we care? A: This theory allows us to understand the Term Structure of Interest Rates. Q: So What? A: The Term Structure tells us the cost of debt. Debt Risk Example (Bond 1) Calculate the duration of our 6 7/8 % bond @ 4.9 % YTM Debt Risk Example (Bond 2) Given a 5 year, 9.0%, $1000 bond, with a 8.5% YTM, what is this bond’s duration? Spot/Forward rates example 1000 = 1000 (1+R3)3 (1+f1)(1+f2)(1+f3) Spot/Forward rates Forward Rate Computations (1+ rn)n = (1+ r1)(1+f2)(1+f3)....(1+fn) Spot/Forward rates Example What is the 3rd year forward rate? 2 year zero treasury YTM = 8.995 3 year zero treasury YTM = 9.660 Spot/Forward rates Example What is the 3rd year forward rate? 2 year zero treasury YTM = 8.995 3 year zero treasury YTM = 9.660 Answer FV of principal @ YTM 2 yr 1000 x (1.08995)2 = 1187.99 3 yr 1000 x (1.09660)3 = 1318.70 IRR of (FV1318.70 PV=1187.99) = 11% Spot/Forward rates Example Two years from now, you intend to begin a project that will last for 5 years. What discount rate should be used when ev