台湾大学财务廖咸兴-Valuing Bonds Training

Chapter4FundamentalsofCorporateFinanceThirdEditionValuingBondsBrealeyMyersMarcusslidesbyMatthewWillIrwin/McGraw-HillTopicsCoveredBondCharacteristicsreadingthefinancialpagesBondPricesandYieldsBondpricesandinterestratesYTMvs.currentyieldRateofReturnInterestRateRiskTheYieldCurveNominalandRealRatesofInterestDefaultRiskBondsTerminologyBond-Securitythatobligatestheissuertomakespecifiedpaymentstothebondholder.Coupon-Theinterestpaymentsmadetothebondholder.FaceValue(ParValueorMaturityValue)-Paymentatthematurityofthebond.CouponRate-Annualinterestpayment,asapercentageoffacevalue.BondsWARNINGThecouponrateISNOTthediscountrateusedinthePresentValuecalculations.Thecouponratemerelytellsuswhatcashflowthebondwillproduce.Sincethecouponrateislistedasa%,thismisconceptionisquitecommon.BondPricingThepriceofabondisthePresentValueofallcashflowsgeneratedbythebond(i.e.couponsandfacevalue)discountedattherequiredrateofreturn.PVcpnrcpnrcpnparrt()()....()()11112BondPricingExampleWhatisthepriceofa6%annualcouponbond,witha$1,000facevalue,whichmaturesin3years?Assumearequiredreturnof5.6%.77.010,1$)056.1(060,1)056.1(60)056.1(60321PVPVBondPricingExample(continued)Whatisthepriceofthebondiftherequiredrateofreturnis6%?000,1$)06.1(060,1)06.1(60)06.1(60321PVPVBondPricingExample(continued)Whatisthepriceofthebondiftherequiredrateofreturnis15%?51.794$)15.1(060,1)15.1(60)15.1(60321PVPVBondPricingExample(continued)Whatisthepriceofthebondiftherequiredrateofreturnis5.6%ANDthecouponsarepaidsemi-annually?91.010,1$)028.1(030,1)028.1(30...)028.1(30)028.1(306521PVPVBondPricingExample(continued)Q:Howdidthecalculationchange,givensemi-annualcouponsversusannualcouponpayments?TimePeriodsPayingcouponstwiceayear,insteadofoncedoublesthetotalnumberofcashflowstobediscountedinthePVformula.DiscountRateSincethetimeperiodsarenowhalfyears,thediscountrateisalsochangedfromtheannualratetothehalfyearrate.BondYieldsCurrentYield-Annualcouponpaymentsdividedbybondprice.YieldToMaturity-Interestrateforwhichthepresentvalueofthebond’spaymentsequaltheprice.BondYieldsCalculatingYieldtoMaturity(YTM=r)Ifyouaregiventhepriceofabond(PV)andthecouponrate,theyieldtomaturitycanbefoundbysolvingforr.PVcpnrcpnrcpnparrt()()....()()11112BondYieldsExampleWhatistheYTMofa6%annualcouponbond,witha$1,000facevalue,whichmaturesin3years?Themarketpriceofthebondis$1,010.7777.010,1$)1(060,1)1(60)1(60321PVrrrPVBondYieldsWARNINGCalculatingYTMbyhandcanbeverytedious.Itishighlyrecommendedthatyoulearntousethe“IRR”or“YTM”or“i”functionsonafinancialcalculator.BondYieldsRateofReturn-Earningsperperiodperdollarinvested.Rateofreturn=totalincomeinvestmentRateofreturn=Couponincome+pricechangeinvestmentInterestRateRisk8809009209409609801,0001,0201,0401,0601,080051015202530TimetoMaturityBondPricePremiumBondDiscountBondInterestRateRisk-5001,0001,5002,0002,5003,0000246810YTM$BondPrice30yrbond3yrbondNominalandRealrates0246810121416828588919497YearPercentYieldonUKnominalbondsYieldonUKindexedbondsDefaultRiskCreditriskDefaultpremiumInvestmentgradeJunkbondsDefaultRiskStandardMoody's&Poor'sSafetyAaaAAAThestrongestrating;abilitytorepayinterestandprincipalisverystrong.AaAAVerystronglikelihoodthatinterestandprincipalwillberepaidAAStrongabilitytorepay,butsomevulnerabilitytochangesincircumstancesBaaBBBAdequatecapacitytorepay;morevulnerabilitytochangesineconomiccircumstancesBaBBConsiderableuncertaintyaboutabilitytorepay.BBLikelihoodofinterestandprincipalpaymentsoversustainedperiodsisquestionable.CaaCCCBondsintheCaa/CCCandCa/CCclassesmayalreadybeCaCCindefaultorindangerofimminentdefaultCCC-ratedbondsofferlittleprospectforinterestorprincipalonthedebtevertoberepaid.CorporateBondsZerocouponsFloatingratebondsConvertiblebondsTheYieldCurveTermStructureofInterestRates-Alistingofbondmaturitydatesandtheinterestratesthatcorrespondwitheachdate.YieldCurve-Graphofthetermstructure.WebResources