1. Fundamentals of Investments10
C h a p t e r
Bond prices and yields
Fundamentals of Investments
Valuation & Management
second edition
Charles J. Corrado Bradford D. Jordan
McGraw Hill / Irwin
Slides by Yee-Tien (Ted) Fu

2. Bond prices and yields
*Our goal in this chapter is to discuss bond prices and yields in some detail.
first, how bond yields are determind and how they are interpreted.
*2nd, Examine what happens to bond prices as a yield change.
*3rd Examine some of the fundamental tools of bond risk analysis used by fixed income portfolio managers.
Goal

3. Bond prices and yields
Coupon rate: a bond's annual coupon divided by its par value .
current yield: a bond's annual coupon divided by its market price .
yield to maturity: the discount rate that equates a bond's price with the present value of its future cash flows .
clean price: the price of a bond net of accrued interest; this is the price that is typically quoted

4. Bond prices and yields
Dirty price: the price of a bond including accrued interest, also known as the full or invoice price . This is the price the buyer actually pays.