Lecture 8 Valuation of Known Cash Flows:Bonds refer to Ch.8 THE COURSE OF FINANCE 2017 SPRING SJTU
Lecture 8 Valuation of Known Cash Flows: Bonds refer to Ch.8 THE COURSE OF FINANCE 2017 SPRING SJTU 1
Objectives To show how to value bonds To understand how bond prices and yields change over time THE COURSE OF FINANCE 2017 SPRING SJTU
Objectives n To show how to value bonds n To understand how bond prices and yields change over time THE COURSE OF FINANCE 2017 SPRING SJTU 2
Chapter 8 Contents 8.1 Using Present Value Formulas to Value Known Flows 8.2 The Basic Building Blocks:Pure Discount Bonds 8.3 Coupon Bonds,Current Yield,and Yield-to-Maturity 8.4 Reading Bond Listings 8.5 Why Yields for the same Maturity Differ 8.6 The Behavior of Bond Prices Over Time THE COURSE OF FINANCE 2017 SPRING SJTU
Chapter 8 Contents 8.1 Using Present Value Formulas to Value Known Flows 8.2 The Basic Building Blocks: Pure Discount Bonds 8.3 Coupon Bonds, Current Yield, and Yield-to-Maturity 8.4 Reading Bond Listings 8.5 Why Yields for the same Maturity Differ 8.6 The Behavior of Bond Prices Over Time THE COURSE OF FINANCE 2017 SPRING SJTU 3
8.1 Using Present Value Formulas to value Known Flows You have been offered the opportunity to purchase a mortgage.It was originally part of a creative financing package where the original owner financed the buyer The remaining life of the mortgage is 60 months,with payment of S400.Your required rate of return is 1.5%month THE COURSE OF FINANCE 2017 SPRING SJTU
8.1 Using Present Value Formulas to Value Known Flows You have been offered the opportunity to purchase a mortgage. It was originally part of a creative financing package where the original owner financed the buyer The remaining life of the mortgage is 60 months, with payment of $400. Your required rate of return is 1.5% / month THE COURSE OF FINANCE 2017 SPRING SJTU 4
Calculation Using the present value of an annuity formula discussed in chapter 4,you will pay no more than 四1-(j - 60 0.015 =$15,752.11 THE COURSE OF FINANCE 2017 SPRING SJTU
Calculation Using the present value of an annuity formula discussed in chapter 4, you will pay no more than THE COURSE OF FINANCE 2017 SPRING SJTU 5 $ 15 ,752 . 11 1 . 015 1 1 0 . 015 400 1 1 1 60 n i i pmt PV