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Bond Valuation

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by

Amira Abdelaal

on 24 April 2016

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Transcript of Bond Valuation

Key Components of a Bond

-Par value: Principal or face value (typically $1000)
-Coupon rate: Annual rate of interest paid.
-Coupon: Regular interest payment received by holder per year.
-Maturity date: Expiration date of bond when par value is paid back.
-Yield to maturity: Expected rate of return, based on price of bond
Notes
Ezay N7l Ay ms2la 3la El Bond (Annual)
1- Bntl3 mn el ms2la el Par value (Principal) w el N (Time) w Coupon Rate( Interest Rate) w Yield to maturity "i" (Discount rate- Market Rate-Return Rate-YTM).
2- Bn7sb el Coupon Payment ( Coupon Rate*Par value)
3- N3wad F el Qanon da

Semi-Annual Bonds
* Haykon mdenii f el Problem Klmt Semi-Annual aw
Conventional Manner


-Coupon rate will
divided by 2
(Hy2sr kda 3la el Coupon Payment).
-N Will
multiplied by 2
.
-YTM will
divided by 2
.


Zero-Coupon Rate
Mdam Zero Coupon Rate Yb2a mosh hykon F Coupon Payment

Hn3wad 3la tool f el Qanon da



F: Face Value (Par value)
i : Yield To Maturity
n : Time " No.s Of years.
Notes
- Lw 2al f el problem Masln Last year Yb2a (N-1) 4 years ago (N-4) etc....
- Lw edanii Date msln From 3-2-1995 To 6-7-2015 Hn7sb el (N= 20 Years)

- lma yegy y2olii en el Company de m7taga tzawd el fund bta3ha b $1000000 Msln w Talb mnii f el problem "How Many Bonds They Must Issue?" Hn2sm el $1000000 3la el Price of Bond el e7na 7sbnah
Bond
Valuation

Thank you!
Lma y2olii Compare Between el Price w el Par value.
Example
Four years ago, the XYZ Corporation issued an 8% coupon (paid semiannually), 20-year, AA-rated bond at its par value of $1000. Currently, the yield to maturity on these bonds is 10%. Calculate the price of the bond today.
Answer
-N = (20-4)*2 = 32 Years
-Semiannual coupon Payment = (.08*1000)/2 = $40
-Par value = $1000
-YTM = 10% /2 = 5%
Full transcript