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Boundless Lecture Slides Free to share, print, make copies and changes. Get yours at www.boundless.com Available on the Boundless Teaching Platform.

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Presentation on theme: "Boundless Lecture Slides Free to share, print, make copies and changes. Get yours at www.boundless.com Available on the Boundless Teaching Platform."— Presentation transcript:

1 Boundless Lecture Slides Free to share, print, make copies and changes. Get yours at www.boundless.com Available on the Boundless Teaching Platform

2 Using Boundless Presentations The Appendix The appendix is for you to use to add depth and breadth to your lectures. You can simply drag and drop slides from the appendix into the main presentation to make for a richer lecture experience. Free to edit, share, and copy Feel free to edit, share, and make as many copies of the Boundless presentations as you like. We encourage you to take these presentations and make them your own. Free to share, print, make copies and changes. Get yours at www.boundless.com Boundless Teaching Platform Boundless empowers educators to engage their students with affordable, customizable textbooks and intuitive teaching tools. The free Boundless Teaching Platform gives educators the ability to customize textbooks in more than 20 subjects that align to hundreds of popular titles. Get started by using high quality Boundless books, or make switching to our platform easier by building from Boundless content pre-organized to match the assigned textbook. This platform gives educators the tools they need to assign readings and assessments, monitor student activity, and lead their classes with pre-made teaching resources. Get started now at: If you have any questions or problems please email: educators@boundless.com http://boundless.com/teaching-platform

3 Boundless is an innovative technology company making education more affordable and accessible for students everywhere. The company creates the world’s best open educational content in 20+ subjects that align to more than 1,000 popular college textbooks. Boundless integrates learning technology into all its premium books to help students study more efficiently at a fraction of the cost of traditional textbooks. The company also empowers educators to engage their students more effectively through customizable books and intuitive teaching tools as part of the Boundless Teaching Platform. More than 2 million learners access Boundless free and premium content each month across the company’s wide distribution platforms, including its website, iOS apps, Kindle books, and iBooks. To get started learning or teaching with Boundless, visit boundless.com.boundless.com Free to share, print, make copies and changes. Get yours at www.boundless.com About Boundless

4 Advantages of Bonds Disadvantages of Bonds Advantages and Disadvantages of Bonds Bond Valuation > Advantages and Disadvantages of Bonds Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/business

5 Bonds are a debt security under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and or repay the principal at a later date, which is termed the maturity. The volatility of bonds (especially short and medium dated bonds) is lower than that of equities (stocks).Thus bonds are generally viewed as safer investments than stocks. Bonds are often liquid – it is often fairly easy for an institution to sell a large quantity of bonds without affecting the price much. Bondholders also enjoy a measure of legal protection: under the law of most countries, if a company goes bankrupt, its bondholders will often receive some money back (the recovery amount). There are also a variety of bonds to fit different needs of investors. Advantages of Bonds Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/bond-valuation-6/advantages-and-disadvantages-of-bonds-65/advantages-of- bonds-296-3887 San Francisco Pacific Railroad Bond View on Boundless.com Bond Valuation > Advantages and Disadvantages of Bonds

6 A bond is an instrument of indebtedness of the bond issuer to the holders.It is a debt security under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest and possibly repay the principal at a later date, which is termed the maturity. Fixed rate bonds are subject to interest rate risk, meaning that their market prices will decrease in value when the generally prevailing interest rates rise. Bonds are also subject to various other risks such as call and prepayment risk, credit risk, reinvestment risk, liquidity risk, event risk, exchange rate risk, volatility risk, inflation risk, sovereign risk, and yield curve risk. A company's bondholders may lose much or all their money if the company goes bankrupt.There is no guarantee of how much money will remain to repay bondholders. Some bonds are callable.This creates reinvestment risk, meaning the investor is forced to find a new place for his money.As a consequence, the investor might not be able to find as good a deal, especially because this usually happens when interest rates are falling. Disadvantages of Bonds Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/bond-valuation-6/advantages-and-disadvantages-of-bonds-65/disadvantages- of-bonds-297-3888 Bond View on Boundless.com Bond Valuation > Advantages and Disadvantages of Bonds

7 Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

8 Key terms Convertible bonds A convertible bond is a type of bond that the holder can convert into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price. Exchange rate risk The exchange rate risk is a financial risk posed by an exposure to unanticipated changes in the exchange rate between two currencies. inflation-linked bonds Inflation-indexed bonds (also known as inflation-linked bonds or colloquially as linkers) are bonds where the principal is indexed to inflation.They are thus designed to cut out the inflation risk of an investment. Reinvestment risk The reinvestment risk is the possibility that the investor might be forced to find a new place for his money.As a consequence, the investor might not be able to find as good a deal, especially because this usually happens when interest rates are falling. Zero coupon bonds A zero-coupon bond (also called a discount bond or deep discount bond) is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity. Free to share, print, make copies and changes. Get yours at www.boundless.com Bond Valuation

9 San Francisco Pacific Railroad Bond A bond is an instrument of indebtedness of the bond issuer to the holders.It is a debt security under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon).In addition, the issuer might have to repay the principal at a later date, which is termed the maturity. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "South Carolina consolidation bond." CC BY-SA http://en.wikipedia.org/wiki/File:South_Carolina_consolidation_bond.jpg View on Boundless.comCC BY-SAhttp://en.wikipedia.org/wiki/File:South_Carolina_consolidation_bond.jpgView on Boundless.com Bond Valuation

10 Bond A bond is a debt owned by the enterprise to the bondholder. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "South Carolina consolidation bond." CC BY-SA http://en.wikipedia.org/wiki/File:South_Carolina_consolidation_bond.jpg View on Boundless.comCC BY-SAhttp://en.wikipedia.org/wiki/File:South_Carolina_consolidation_bond.jpgView on Boundless.com Bond Valuation

11 Free to share, print, make copies and changes. Get yours at www.boundless.com Bond Valuation Which of the following statements about the disadvantages of bonds as investments is correct? A) When a bond issuer is able to pay off a bond early, the bond is subject to event risk. B) Interest rate risk is only a problem if the bondholder decides to hold the bond until it matures. C) Bonds are subject to prepayment risk, credit risk, reinvestment risk, and yield curve risk. D) All of these answers.

12 Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Bond Valuation Which of the following statements about the disadvantages of bonds as investments is correct? A) When a bond issuer is able to pay off a bond early, the bond is subject to event risk. B) Interest rate risk is only a problem if the bondholder decides to hold the bond until it matures. C) Bonds are subject to prepayment risk, credit risk, reinvestment risk, and yield curve risk. D) All of these answers.

13 Free to share, print, make copies and changes. Get yours at www.boundless.com Bond Valuation Which of the following statements regarding the advantages of bonds as an investment, are true? A) Bonds are more liquid than stock. B) If a company goes bankrupt, its bondholders will recover the entirety of the bond's principal. C) All of these answers. D) The market price of bonds are less volatile than stocks.

14 Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Bond Valuation Which of the following statements regarding the advantages of bonds as an investment, are true? A) Bonds are more liquid than stock. B) If a company goes bankrupt, its bondholders will recover the entirety of the bond's principal. C) All of these answers. D) The market price of bonds are less volatile than stocks.

15 Attribution Wikipedia. "Bond (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bond_(finance)CC BY-SA 3.0http://en.wikipedia.org/wiki/Bond_(finance) Wikipedia. "inflation-linked bonds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/inflation-linked+bondsCC BY-SA 3.0http://en.wikipedia.org/wiki/inflation-linked+bonds Wikipedia. "Zero coupon bonds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Zero+coupon+bondsCC BY-SA 3.0http://en.wikipedia.org/wiki/Zero+coupon+bonds Wikipedia. "Convertible bonds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible+bondsCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible+bonds Wikipedia. "Bond (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bond_(finance)CC BY-SA 3.0http://en.wikipedia.org/wiki/Bond_(finance) Wikipedia. "Exchange rate risk." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Exchange+rate+riskCC BY-SA 3.0http://en.wikipedia.org/wiki/Exchange+rate+risk Wikipedia. "Reinvestment risk." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Reinvestment+riskCC BY-SA 3.0http://en.wikipedia.org/wiki/Reinvestment+risk Free to share, print, make copies and changes. Get yours at www.boundless.com Bond Valuation


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