05.2 BondYields1.Yield to Maturity$5$100Price of One-Year 5 percent Coupon Bond = (1 + i) (1+i)The value of i that solves this equation is theyield to maturity6-11
6-11 5.2 Bond Yields 1. Yield to Maturity Price of One-Year 5 percent Coupon Bond = The value of i that solves this equation is the yield to maturity (1 ) $100 (1 ) $5 i + i + +
a5.2 Bond YieldsYield To MaturityIf the price of the bond is $100, then the yieldto maturity equals the coupon rate.Since the price rises as the yield falls, whenthe price is above $100, the yield to maturitymust be below the coupon rate.Since the price falls as the yield rises, whenthe price is below $100, the yield to maturitymust be above the couponrate.6-12
6-12 5.2 Bond Yields Yield To Maturity • If the price of the bond is $100, then the yield to maturity equals the coupon rate. • Since the price rises as the yield falls, when the price is above $100, the yield to maturity must be below the coupon rate. • Since the price falls as the yield rises, when the price is below $100, the yield to maturity must be above the coupon rate
Bond Yields:CurrentYieldC2.Current Yield当期收益率Yearly CouponPaymentCurrent YieldPricePaid6-13
6-13 Bond Yields： Current Yield 2. Current Yield当期收益率 PricePaid Yearly Coupon Payment Current Yield =
Bond Yields:C8Yield to Maturity3. Relationship Between a Bond's Price and ItsCoupon Rate, Current Yield and Yield to MaturityBond Price < Face Value: Coupon Rate < CurrentYield < Yield to MaturityBond Price = Face Value: Coupon Rate = CurrentYield=Yield to MaturityBond Price > Face Value: Coupon Rate >CurrentYield > Yield to Maturity6-14
6-14 Bond Yields： Yield to Maturity 3. Relationship Between a Bond’s Price and Its Coupon Rate, Current Yield and Yield to Maturity • Bond Price < Face Value: Coupon Rate < Current Yield < Yield to Maturity • Bond Price = Face Value: Coupon Rate = Current Yield = Yield to Maturity • Bond Price > Face Value: Coupon Rate > Current Yield > Yield to Maturity
BondYields:HoldingPeriodaReturns4.Holding Period Returns 持有期收益率The holding period return - the return toholding a bond and selling it beforematurity.The holding period return can differ fromthe yield to maturity6-15
6-15 Bond Yields： Holding Period Returns 4. Holding Period Returns 持有期收益率 The holding period return – the return to holding a bond and selling it before maturity. The holding period return can differ from the yield to maturity