Bonds And Their Valuation

Chapter 6 Bonds and their Valuation OVERVIEW This chapter takes a discussion of the key characteristics of bandages, and so uses time foster of money concepts to determine nonplus encourages. Bonds argon one of the roughly important types of securities to investors, and atomic number 18 a major source of finance for corporations and disposals. The treasure of any pecuniary asset is the present value of the change flows expected from that asset. in that locationfore, once the cash flows have been estimated, and a discount rate determined, the value of the financial asset fanny be calculated. A bond is determine as the present value of the stream of raise payments (an annuity) overconfident the present value of the equation value, which is the principal amount for the bond, and is current by the investor on the bonds maturity date. Depending on the relationship between the current following rate and the bonds coupon rate, a bond can distribute at it s par value, at a discount, or at a premium. The enumerate rate of return on a bond is comprised of ii components: interest yield and capital gains yield. The bond valuation concepts developed earlier in the chapter are use to illustrate interest rate and reinvestment rate risk. In addition, failure risk, various types of integrated bonds, bond ratings, and bond markets are discussed.

define A bond is a long-term contract under which a borrower agrees to make payments of interest and principal, on specific dates, to the holders of the bond. There are four of import types of bonds: Treasury, bodied, mu nicipal, and foreign. Each type differs wi! th mention to expected return and breaker point of risk. ? Treasury bonds, sometimes referred to as government bonds, are issued by the Federal government and are not exposed to nonpayment risk. ? Corporate bonds are issued by corporations and are exposed to default risk. Different corporate bonds have different levels of default risk, depending on the issuing accompanys characteristics and on the terms of the...If you pauperization to get a full essay, order it on our website: OrderCustomPaper.com

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