公司理财chap5

InterestRatesandBondValuationChapter5KeyConceptsandSkills•Understandbondvaluesandwhytheyfluctuate•Understandbondratingsandwhattheymean•Understandtheimpactofinflationoninterestrates•UnderstandthetermstructureofinterestratesandthedeterminantsofbondyieldsChapterOutline5.1BondsandBondValuation5.2MoreonBondFeatures5.3InflationandInterestRates5.4DeterminantsofBondYields5.1BondsandBondValuation•Abondisalegallybindingagreementbetweenaborrowerandalenderthatspecifiesthe:–Par(face)value(面值)–Couponrate(票面利率)–Couponpayment(票面利息)–MaturityDate(到期日)•Theyieldtomaturity(到期收益率)istherequiredmarketinterestrateonthebond.BondValuation•PrimaryPrinciple:–Valueoffinancialsecurities=PVofexpectedfuturecashflows•Bondvalueis,therefore,determinedbythepresentvalueofthecouponpaymentsandparvalue.•Interestratesareinverselyrelatedtopresent(i.e.,bond)values.TheBondPricingEquationTRTRPVIFFVPVIFACR,,TT)(1FVRR)(11-1CValueBond•Supposeacorporateissueda5-yearbondwith8%coupononJanuary1of2013.–TheParValueofthebondis$1,000.–Couponpaymentsaremadesemi-annually(June30andDecember31forthisparticularbond).–Sincethecouponrateis8%,thepaymentis$40.–OnJanuary1of2013thesizeandtimingofcashflowswillbe:13/1/140$13/30/640$13/31/1240$17/30/640$17/31/12BondExample•OnJanuary1,2013,therequiredyieldis6%.•Howcanwecalculatethebondvalue?31.085,1$000,1$40$)03.1(000,1$)03.1(11206.40$10%,310%,31010PVIFPVIFAPV•Nowassumethattherequiredyieldis12%.•Whatisthebond’svaluenow?80.852$000,1$40$)06.1(000,1$)06.1(11212.40$10%,610%,61010PVIFPVIFAPV•Nowassumethattherequiredyieldisalso8%.•Whatisthebond’svaluenow?04.1000$000,1$40$)04.1(000,1$)04.1(11208.40$10%,410%,41010PVIFPVIFAPVBondConceptsBondpricesandmarketinterestratesmoveinoppositedirections.Whencouponrate=YTM,price=parvalue(parbond)WhencouponrateYTM,priceparvalue(premiumbond)WhencouponrateYTM,priceparvalue(discountbond)•Supposeafirmweretoissueabondwith10yearstomaturity.Thefacevalueofthebondis$1,000andtheannualcouponis$100.•Whatisthevalueofthebondiftherequiredmarketinterestrateis8%/10%/12%?Whentherequiredmarketinterestrateis8%1134100010010%,810%,80PVIFPVIFAPVWhentherequiredmarketinterestrateis10%1000100010010%,1010%,100PVIFPVIFAPVWhentherequiredmarketinterestrateis12%887100010010%,1210%,120PVIFPVIFAPV•Whatisthevalueofthebond2yearsafterissuing?Whentherequiredmarketinterestrateis8%7.111410001008%,88%,82PVIFPVIFAPVWhentherequiredmarketinterestrateis10%100010001008%,108%,102PVIFPVIFAPVWhentherequiredmarketinterestrateis12%90010001008%,128%,122PVIFPVIFAPVWhentherequiredmarketinterestrateisconstant:Thevalueofparbondwillmaintainunchanged.Thevalueofpremiumbondwillgraduallydecreasewiththecomingofmaturitydate.It=parvalueatmaturitydate.Thevalueofdiscountbondwillgraduallyincreasewiththecomingofmaturitydate.It=parvalueatmaturitydate.InterestRateRiskChangeinpriceduetochangesininterestrates:Allotherthingsbeingequal,thelongerthetimetomaturity,thegreatertheinterestraterisk.Allotherthingsbeingequal,thelowerthecouponrate,thegreatertheinterestraterisk.Haveatry!•Supposeafirmhasabondwith20yearstomaturity.Thefacevalueofthebondis$20,000.Thebondmakesnopaymentsforthefirstsixyears,thenpays$800everysixmonthsoverthesubsequenteightyears,andfinallypays$1,000everysixmonthsoverthelast6years.•Iftherequiredreturnonthebondis8%compoundedsemiannually,Whatisthecurrentpriceofthebond?ComputingYieldtoMaturity•Yieldtomaturityistherateimpliedbythecurrentbondprice.•FindingtheYTMrequirestrialanderrorandissimilartotheprocessforfindingRwithanannuity.•Supposeweareinterestedina6-year,8%couponbond.Thefacevalueofthebondis$1000andthepriceofthebondis$1115.•WhatistheYTMofthisbond?6.6,1000801115iiPVIFPVIFACurrentYieldvs.YieldtoMaturity•CurrentYield=annualcoupon/price•Yieldtomaturity=Currentyield+Capitalgainsyield•Example:10%couponbond,withannualcoupons,facevalueof1,000,20yearstomaturity,$1,196.31price–Currentyield=100/1196.31=8.36%–Priceinoneyear(assumingnochangeinYTM)=1,192.06–Capitalgainsyield=(1192.06–1196.31)/1196.31=-.36%–YTM=8.36-.36=8%PureDiscountBonds(纯贴现债券)•Makenoperiodicinterestpayments(couponrate=0%)•Theentireyieldtomaturitycomesfromthedifferencebetweenthepurchasepriceandtheparvalue.•Cannotsellformorethanparvalue•Sometimescalledzeroes,deepdiscountbonds,ororiginalissuediscountbonds(OIDs)Informationneededforvaluingpurediscountbonds:–Timetomaturity(T)–Facevalue(F)–Discountrate(r)TRFVPV)1(Presentvalueofapurediscountbondattime0:00$10$20$1TF$TPureDiscountBonds:ExampleFindthevalueofa30-yearzero-couponbondwitha$1,000parvalueandaYTMof6%.11.174$)06.1(000,1$)1(30TRFVPV00$10$20$29000,1$3000$10$20$29000,1$30Consols(金边债券)•Notallbondshaveafinalmaturity.•Britishconsolspayasetamount(i.e.,coupon)everyperiodforever.•Theseareexamplesofaperpetuity.RCPV•Debt–Notanownershipinterest–Creditorsdonothavevotingrights–Interestisconsideredacostofdoingbusinessandistaxdeductible–Creditorshavelegalrecourseifinterestorprincipalpaymentsaremissed–Excessdebtcanleadtofinancialdistressandbankruptcy