Section outline

  • Learning Objectives:

    The students should be able to:

    • Calculate a bond’s price given a market discount rate;
    •   Identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity);
    •    Define spot rates and calculate the price of a bond using spot rates;
    •     Describe and calculate the flat price, accrued interest, and the full price of a bond;
    • describe matrix pricing;

    Chapter Content:

    • Bond prices and the Time Value of Money, 
    • Prices and yields, 
    • The maturity structure of interest rates, 
    • Yield Spreads.