BondYieldsaExamples:10 year bond (Face value=$100) and a 6%coupon rate.Sold one yearlater.6-16
6-16 Bond Yields Examples: 10 year bond (Face value=$100) and a 6% coupon rate. Sold one year later
CBond YieldsIf the interest Rate in one year is 5%One year holding Period return =$6$13.11$107.11- $100=.1311$100$100$100or13.11%6-17
6-17 Bond Yields If the interest Rate in one year is 5% One year holding Period return = or 13.11% .1311 $100 $13.11 $100 $107.11 $100 $100 $6 = = − +
CBond Yields8If the interest rate in one year is 7%One year holding Period return =$6-$.52$93.48 -$100=-.0052十$100$100$100or-.52%6-18
6-18 Bond Yields If the interest rate in one year is 7% One year holding Period return = or -.52% .0052 $100 $.52 $100 $93.48 $100 $100 $6 = − − = − +
BondYieldso4.Holding PeriodReturnsYearly Coupon PaymentChange in Price of the BondPrice PaidPrice of the Bond= Current Yield + Capital Gain (as a %)6-19
6-19 Bond Yields 4. Holding Period Returns Price of the Bond Change i n Price of the Bond Price Paid Yearly Coupon Payment = + = Current Yield + Capital Gain (as a %)
CaOne Year Zero-coupon (discount) Bond$100$100-PPorP1+i6-20
6-20 One Year Zero-coupon (discount) Bond. P P or i i P − = + = $100 1 $100