Slides By John Dawson and Kevin Brady Bond Prices and Interest Rates Begin CoreEconomics, 2e Interactive Examples To navigate, please click the appropriate.

Slides:



Advertisements
Similar presentations
Slides By Timothy Diette and Kevin Brady Profit in Competition Begin Interactive Examples CoreEconomics, 2e To navigate, please click the appropriate green.
Advertisements

Slides By Timothy Diette and Kevin Brady Shifts of Supply and Demand Begin Interactive Examples To navigate, please click the appropriate green buttons.
Bond Valuation Chapter 8.
Chapter 23 Monetary Policy
6- 1 McGraw Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved Fundamentals of Corporate Finance Sixth Edition Richard.
Besley: Chapter 7 Homework #4 Pg Pg Pg
Interest Rates Chapter 4. Valuing Debt In 1945, U.S. Treasury bills offered a return of 0.4%. At their 1981 peak, they offered a return of over 17%. Why.
2-1 Copyright © 2006 McGraw Hill Ryerson Limited prepared by: Sujata Madan McGill University Fundamentals of Corporate Finance Third Canadian Edition.
Rate of Return Lesson 2 How Time Value of Money Affects Returns.
Lecture: 3 - Stock and Bond Valuation How to Get a “k” to Discount Cash Flows - Two Methods I.Required Return on a Stock (k) - CAPM (Capital Asset Pricing.
CHAPTER 15 The Term Structure of Interest Rates. Information on expected future short term rates can be implied from the yield curve The yield curve is.
Interest Rates and Rates of Return
Bond Valuation Problems
CHAPTER 14 Bond Prices and Yields. Face or par value Coupon rate – Zero coupon bond Compounding and payments – Accrued Interest Indenture Bond Characteristics.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part.
To navigate, please click the appropriate green buttons. (Do not use the arrows on your keyboard) Worked Out Problems Slides Created By Dr. John Dawson.
The Multiplier Effect and Crowding Out Slides By John Dawson and Kevin Brady Begin Interactive Examples CoreEconomics, 2e To navigate, please click the.
Chapter 8 Valuing Bonds. 8-2 Chapter Outline 8.1 Bond Cash Flows, Prices, and Yields 8.2 Dynamic Behavior of Bond Prices 8.3 The Yield Curve and Bond.
Fabozzi: Investment Management Graphics by
Chapter 3 Price Floors / Minimum Wage
Slides By Timothy Diette and Kevin Brady Input Markets Begin Interactive Examples To navigate, please click the appropriate green buttons. (Do not use.
Chapter 5 Valuation Concepts. 2 Basic Valuation From “The Time Value of Money” we realize that the value of anything is based on the present value of.
Chapter 19 Aggregate Demand and Supply
1 Valuation and Characteristics of Bonds Chapter 7.
VALUATION OF BONDS AND SHARES CHAPTER 3. LEARNING OBJECTIVES  Explain the fundamental characteristics of ordinary shares, preference shares and bonds.
Slides By John Dawson and Kevin Brady Begin Exchange Rates Interactive Examples Material from this presentation can be found in: Chapter 26 To navigate,
Slides By John Dawson and Kevin Brady Begin Money Multiplier Interactive Examples To navigate, please click the appropriate green buttons. (Do not use.
Chapter 9 Debt Instruments Quantitative Issues.
6-1 Lecture 6: Valuing Bonds A bond is a debt instrument issued by governments or corporations to raise money The successful investor must be able to:
Slides Created By Kevin Brady and Eric Chiang Market for Loanable Funds Interactive Examples To navigate, please click the appropriate green buttons. (Do.
Begin Slides By David Gillette and Kevin Brady Fiscal Policy and the Multiplier Material from this presentation can be found in: Chapter 19 Chapter 20.
©2009, The McGraw-Hill Companies, All Rights Reserved 3-1 McGraw-Hill/Irwin Chapter Three Interest Rates and Security Valuation.
Slides by John Dawson and Kevin Brady Begin Comparative Advantage Interactive Examples CoreEconomics, 2e To navigate, please click the appropriate green.
GDP Calculations Slides By John Dawson and Kevin Brady Begin CoreEconomics, 2e Interactive Examples To navigate, please click the appropriate green buttons.
Chapter Four Present Value. Copyright © Houghton Mifflin Company. All rights reserved.4 | 2 Would you rather have $100 today or $105 in one year? What.
Slides By Timothy Diette and Kevin Brady Elasticity of Supply Begin Interactive Examples CoreEconomics, 2e To navigate, please click the appropriate green.
CHAPTER SIX Bond and Common Share Valuation J.D. Han.
Slides by Timothy Diette and Kevin Brady Comparative Advantage Begin Interactive Examples To navigate, please click the appropriate green buttons. (Do.
 Would you rather have a dollar today or a dollar next year?  Present Value: The use of interest rates to compare the value of a dollar realized today.
Fundamentals of Corporate Finance Chapter 6 Valuing Bonds Topics Covered The Bond Market Interest Rates and Bond Prices Current Yield and Yield to Maturity.
Inflation and its Effects Slides By John Dawson and Kevin Brady Begin Interactive Examples To navigate, please click the appropriate green buttons. (Do.
Begin Slides Created By Kyle Hampton and Kevin Brady Shifts in Supply and Demand Interactive Examples To navigate, please click the appropriate green buttons.
Growth Rates Slides By John Dawson and Kevin Brady Begin Interactive Examples To navigate, please click the appropriate green buttons. (Do not use the.
LESSON 7.4 & 7.5 OBJECTIVES BONDS. AFTER STUDYING THIS LESSON YOU WILL BE ABLE TO DO THE FOLLOWING: CALCULATE MARKET PRICE OF BONDS CALCULATE THE TOTAL.
Business Math JOHN MALL JUNIOR/SENIOR HIGH SCHOOL.
Chapter 16 Investing in Bonds. Copyright ©2014 Pearson Education, Inc. All rights reserved.16-2 Chapter Objectives Identify the different types of bonds.
Slides Created By Kevin Brady and Eric Chiang Keynesian Macroeconomics Interactive Examples To navigate, please click the appropriate green buttons. (Do.
8 Bond Valuation and Risk. PRELIMINARY COMMENTS Unfortunately, we do not have time to delve deeply into Ch. 8. However, there are a few key concepts about.
7-1 Bonds and Their Valuation Key features of bonds Bond valuation Measuring yield Assessing risk.
Fundamentals of Corporate Finance Chapter 6 Valuing Bonds Topics Covered The Bond Market Interest Rates and Bond Prices Current Yield and Yield to Maturity.
How Do Bond Prices Change? Bonds are sensitive to interest rates It depends on the rate at which you issued the bond – A 1 year T-bill is paying 1.2% interest.
McGraw-Hill/Irwin ©2001 The McGraw-Hill Companies All Rights Reserved 6.0 Chapter 6 Interest Rates and Bond Valuation.
FIXED INCOME MANAGEMENT1 MEASURING YIELD. FIXED INCOME MANAGEMENT2.
4-1 Introduction Credit is one of the critical mechanisms we have for allocating resources. Although interest has historically been unpopular, this comes.
McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Money and Banking Lecture 14.
Chapter 5 :BOND PRICES AND INTEREST RATE RISK Mr. Al Mannaei Third Edition.
Bond Valuation Chapter 6 Miss Faith Moono Simwami
Introduction Alexander Hamilton, the first Secretary of the US Treasury, brought bonds to the U.S. One of his first acts was to consolidate all debt from.
Chapter 6 Learning Objectives
Multiple-Choice Questions and Answers
Why is it that When equity markets are bullish we say the “Sensex” has “gone up” or “Equity prices” have “gone up” or “NAVs” have “gone up” BUT when.
Why is it that When equity markets are bullish we say the “Sensex” has “gone up” or “Equity prices” have “gone up” or “NAVs” have “gone up” BUT when.
Valuation Concepts © 2005 Thomson/South-Western.
Chapter 8 Valuing Bonds.
Bond Valuation Chapter 5 Miss Faith Moono Simwami
Bond Valuation Chapter 6.
BIJAY CHALISE, SWARNA MAHARJAN, DIPESH PANDEY
Bond Valuation Chapter 5 Miss Faith Moono Simwami
Bonds, Bond Prices, Interest Rates and Holding Period Return
Bond Yield.
Presentation transcript:

Slides By John Dawson and Kevin Brady Bond Prices and Interest Rates Begin CoreEconomics, 2e Interactive Examples To navigate, please click the appropriate green buttons. (Do not use the arrows on your keyboard) Material from this presentation can be found in: Chapter 22

Answer Bond Prices and Interest Rates QUESTION 1: Suppose you bought a government perpetuity bond one year ago with a face value of $5,000 and an annual interest payment of $350. If market interest rates are now 6%, what is the new price of the bond? Explain why the price of the bond has changed. Interactive Examples

Bond Prices and Interest Rates ANSWER TO QUESTION 1: The formula for the price of a perpetuity bond is: Price of Bond = Interest Payment / Yield Price of Bond = $350 /.06 = $5, It is clear that the price of the bond has risen. Why? Because the original yield was 7%, which can be found by dividing the interest payment by the original price of the bond. ($350/$5000) =.07, or 7% Since bond prices and interest rates move in opposite directions, a fall in interest rates to 6% would increase the price at which you would be able to sell your bond. A higher price can be realized in the face of falling interest rates because other investments are now offering lower interest rates. Interactive Examples Next

Answer Bond Prices and Interest Rates QUESTION 2: Before you are able to sell your bond, suppose high budget deficits and a rising national debt cause rumors of the U.S. government defaulting on its debt. How would you expect these rumors to affect the interest rate on newly issued government bonds? How about the price at which you are now able to sell your bond? Interactive Examples

Bond Prices and Interest Rates ANSWER TO QUESTION 2: If the default risk on government bonds increases, a higher implied interest rate would now be required to encourage investors to purchase those bonds. Since interest rates and bond prices move in opposite directions, this development would imply a lower price at which you would now be able to sell your bond. Interactive Examples The End

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2024 SlidePlayer.com Inc. All rights reserved.