公司理财第五版高等院校双语教材·金融系列-chapter 5(ppt 34页) 精编版

COPYRIGHTZHULI,1,Chapter 5,Valuing bonds,COPYRIGHTZHULI,2,Objectives,Distinguish among a bonds coupon rate, current yield, and yield to maturityFind the market price of a bond given its yield to maturity, find a bonds yield given its price, and demonstrate why prices and yields vary inverselyShow why bonds exhibit interest rate riskUnderstand why investors pay attention to bond ratings and demand a higher interest rate for bonds with low ratings,COPYRIGHTZHULI,3,Content,Bond characteristicsInterest rates and bond pricesCurrent yield and yield to maturityBond rates of returnThe yield curveCorporate bonds and the risk of default,COPYRIGHTZHULI,4,Bond: security that obligates the issuer to make specified payments to the bondholderCoupon: the interest payments paid to the bondholderFace value or principal: payment at maturity of the bond. Also called par value or maturity valueCoupon rate: annual interest payment as a percentage of face value,COPYRIGHTZHULI,5,Consider a U.S. Treasury bond as an example. Several years ago, the U.S. Treasury raised money by selling 5.5% coupon, 2008 maturity Treasury bonds. Each bond has a face value of $1000. Suppose that in 2005 you decided to buy the 5.5% coupon bonds maturing in 2008. If you planned to hold the bond until maturity, the cash flows would be as follows:,COPYRIGHTZHULI,6,Coupon payment,Face value,Bond prices are quoted in 32nds rather than decimalse.g. 105:32 means that the price is 105 and 23/32, or 105.719%, therefore each bond costs $1057.19,COPYRIGHTZHULI,7,Bond: 债券Coupon: 息票Face value or par value : 面值Principal:本金Maturity value: 到期值Coupon rate: 票面利率,COPYRIGHTZHULI,8,Content,Bond characteristicsInterest rates and bond pricesCurrent yield and yield to maturityBond rates of returnThe yield curveCorporate bonds and the risk of default,COPYRIGHTZHULI,9,How much would you have been willing to pay for the bond?,The value of a security is the present value of the cash flows it will pay to its owners. To find this value, we need to discount each future payment by the current interest rate.,COPYRIGHTZHULI,10,Assume almost identical bonds maturing at the same time offered an interest rate of about 3.5%.This is the rate that investors could earn by placing their funds in similar securities rather than this bond. Opportunity cost of capital,PV = 55/(1.035)+55/(1.035)2+1055/(1.035)3 = $1056.03 $1000,PV = PV (coupons) + PV(face value) = (couponannuity factor)+(face valuediscount factor),COPYRIGHTZHULI,11,How bond prices vary with interest rates,Suppose that investors demanded an interest rate of 5.5% on 3-year treasury bond. What would be the price?,PV = 55/(1.055)+55/(1.055)2+1055/(1+1.055)3 = $1000The bond sells for its face value.,Suppose that the interest rate is 15%PV = 783.09 1000,COPYRIGHTZHULI,12,When the interest rate rises, the bond prices fall. Conversely, declines in the interest rate result in higher prices.,Do not confuse coupon payment with interest rate!,COPYRIGHTZHULI,13,Content,Bond characteristicsInterest rates and bond pricesCurrent yield and yield to maturityBond rates of returnThe yield curveCorporate bonds and the risk of default,COPYRIGHTZHULI,14,Suppose you are considering the purchase of a 3-year bond with a coupon rate of 10%. Your investment adviser quotes a price for the bond. How do you calculate the rate of return the bond offer?,For bonds priced at face value, the rate of return is the coupon rate.,COPYRIGHTZHULI,15,Suppose that the market price of the 3-year bond is $1136.16. What is the rate of return now?,Current yield = 100/1136.16 = 8.8%,Current yield: annual coupon payments divided by bond prices,COPYRIGHTZHULI,16,Total return depends on both interest income and any capital gains or losses.A bond that is priced above its face value is said to sell at a premium. Investors who buy a bond at a premium face a capital loss over the life of the bond, so the return on these bonds is always less than the bonds current yield.A bond that is priced below face value sells at a discount. Investors in discount bonds face a capital gain over the life of the bond, the return on these bonds is greater than the current yield.,The current yield focus only on current income and ignores prospective price increases of decreases, it dose not measure the bonds total rate of return.,The yield to maturity is a measure of a bonds total return.,COPYRIGHTZHULI,17,Yield to maturity: the discount rate that makes the present value of the bonds payments equal to its price.,If you can buy the 3-year bond at face value, the yield to maturity is the coupon rate, 10%.,PV at 10% = 100/(1.10)+100/(1.10)2+1100/(1.10)3 = 1000,Suppose the price of the bond is $1136.16, the yield to maturity is only 5%.,PV at 5% = 100/(1.05)+100/(1.05)2+1100/(1.05)3 = 1136.16,COPYRIGHTZHULI,18,The only general procedure for calculating yield to maturity is trial and error. You guess at an interest rate and calculate the PV of the bonds payment. If the PV is greater than the actual price, your discount rate must have been too low, so you try a higher interest rate. Conversely, if PV is less than price, you must reduce the interest rate.,COPYRIGHTZHULI,19,Current yield: 当期收益率Capital gains or losses: 资本利得或损失Yield to maturity: 到期收益率Premium: 溢价Discount: 折价Trial and error: 试误法,COPYRIGHTZHULI,20,Content,Bond characteristicsInterest rates and bond pricesCurrent yield and yield to maturityBond rates of returnThe yield curveCorporate bonds and the risk of default,COPYRIGHTZHULI,21,Suppose you buy the 5.5% treasury bond today for a price of $1056.03 and sell it next year at a price of $1080. The return on your investment is the $55 coupon payment plus the price change of ($1080-1056.03) = $23.97,Rate of return = (coupon income + price change)/investment = (55+23.97)/1056.03 = 7.48%,Rate of return: total income per period per dollar invested,Do not confuse the bonds rate or return over a particular investment period with its yield to maturity.,COPYRIGHTZHULI,22,When interest rates do not change, the bond price changes with time so that the total return on the bond is equal to the yield to maturity.,If the bonds yield to maturity increases, the rate of return during the period will be less than that yield.If the yield to maturity decreases, the rate of return will be greater than that yield.,COPYRIGHTZHULI,23,Bond prices fluctuate as the interest rates change (interest rate risk).,But all bonds are not equally affected by the changing interest rates.,COPYRIGHTZHULI,24,Bond rate of return: 债券收益率Treasury bond: 国债Interest rate risk: 利率风险,COPYRIGHTZHULI,25,Content,Bond characteristicsInterest rates and bond pricesCurrent yield and yield to maturityBond rates of returnThe yield curveCorporate bonds and the risk of default,COPYRIGHTZHULI,26,The longer the maturity, the higher the yield.,Yield curve: graph of the relationship between time to maturity and yield to maturity.,COPYRIGHTZHULI,27,Even when the yield curve if upward-sloping, investors might rationally stay away from long-term bonds for two reasons.The prices of long-term bonds fluctuate much more than prices of short-term bonds.Short-term investors can profit if interest rate rise.The real interest rate on the treasury bonds depends on the rate of inflation. Investors can nail down a real rate of interest by buying an indexed bond, e.g. Treasury Inflation-Protected Securities (TIPS),COPYRIGHTZHULI,28,Yield curve: 收益率曲线Long-term bond: 长期债券Indexed bond: 指数债券Treasury inflation-protection security (TIPS): 通胀保护型债券,COPYRIGHTZHULI,29,Content,Bond characteristicsInterest rates and bond pricesCurrent yield and yield to maturityBond rates of returnThe yield curveCorporate bonds and the risk of default,COPYRIGHTZHULI,30,There is an important distinction between bonds issued by corporations and those issued by the U.S. Treasury.National governments dont go bankrupt, so investors do not worry that the U.S. Treasury will default on its bonds.However, there is some chance that corporations may get into financial difficulties and may defau