![]() Problem: Suppose the following zero-coupon bonds are trading at the prices shown below per $100 face value. ![]() Indeed, the YTM is the rate of return of buying the bond.ġ6 Example 6.1a Yields for Different Maturities (1 of 4) The table gives the prices and number of years to maturity and the face value is $100 per bond.ġ4 Example 6.1 Yields for Different Maturities (3 of 4)ġ5 Example 6.1 Yields for Different Maturities (4 of 4)Įvaluate Solving for the YTM of a zero-coupon bond is the same process we used to solve for the rate of return in Chapter 4. Maturity 1 year 2 years 3 years 4 years Price $96.62 $92.45 $87.63 $83.06ġ3 Example 6.1 Yields for Different Maturities (2 of 4) Determine the corresponding yield to maturity for each bond. Problem Suppose the following zero-coupon bonds are trading at the prices shown below per $100 face value. Yield to Maturity of a Zero-Coupon Bond The discount rate that sets the present value of the promised bond payments equal to the current market price of the bond Yield to Maturity of an n-Year Zero-Coupon Bond:ġ2 Example 6.1 Yields for Different Maturities (1 of 4) government bonds with maturity of up to one yearĪ one-year, risk-free, zero-coupon bond with a $100,000 face value has an initial price of $96,618.36 If you purchased this bond and held it to maturity, you would have the following cash flows: Only two cash flows The bond’s market price at the time of purchase The bond’s face value at maturity Treasury bills are zero-coupon U.S. Term The time remaining until the repayment date. It is usually repaid on the maturity date. Principal or Face Value The notional amount used to compute the interest payment. The amount paid is equal to: Maturity Date Final repayment date of the bond. They are determined by the coupon rate, which is stated on the bond certificate. Usually paid semiannually, but the frequency is specified in the bond certificate. Coupons The promised interest payments of a bond. Set by the issuer and stated on the bond certificate By convention, expressed as an APR, so the amount of each coupon payment, CPN, isīond Certificate States the terms of a bond as well as the amounts and dates of all payments to be made. ![]() © 1999–2006.Ħ 6.1 Bond Terminology (2 of 3) Face value (aka par value or principal amount) Notional amount used to compute interest payments Usually standard increments, such as $1000 Typically repaid at maturity Couponsħ 6.1 Bond Terminology (3 of 3) Coupon rate Payments Maturity date Termĥ Figure 6.1 A Bearer Bond and Its Unclipped Coupons Issued by the Elmira and Williamsport Railroad Company for $500 Source : Courtesy Heritage Auctions, Inc. Terms of the bond Amounts and dates of all payments to be made. All Rights Reserved.Ģ Chapter Outline 6.1 Bond Terminology 6.2 Zero-Coupon Bonds 6.3 Coupon Bonds 6.4 Why Bond Prices Change 6.5 Corporate Bondsģ Learning Objectives Understand bond terminologyĬompute the price and yield to maturity of a zero- coupon bond Compute the price and yield to maturity of a coupon bond Analyze why bond prices change over time Know how credit risk affects the expected return from holding a corporate bondĤ 6.1 Bond Terminology (1 of 3) Bond Bond certificate Payments Remote desktop is a common feature in operating systems.Fourth Edition Chapter 6 Bonds If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed: 1) MathType Plugin 2) Math Player (free versions available) 3) NVDA Reader (free versions available) Copyright © 2018, 2015, 2012 Pearson Education, Inc. Reads information about supported languages Software packing is a method of compressing or encrypting an executable.Īdversaries may interact with the Windows Registry to gather information about the system, configuration, and installed software. Opens the Kernel Security Device Driver (KsecDD) of Windows Loadable Kernel Modules (or LKMs) are pieces of code that can be loaded and unloaded into the kernel upon demand. Installs hooks/patches the running process Windows processes often leverage application programming interface (API) functions to perform tasks that require reusable system resources.
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