July 2011
Beginner
288 pages
7h 22m
English
Content preview from BOND MATH: The Theory Behind the Formulas
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Conclusion
In many ways a zero-coupon bond is the ultimate building block for the study of bond math because there are just two cash flows. Its yield to maturity is calculated with intuitive time-value-of-money bond math. Unlike the money market, there are no arcane conventions such as discount rates or 360-day years. Moreover, we can assume arbitrarily any compounding frequency for the annual yield, from continuous to just once a year. The price and yield calculations are straightforward and easy compared to what is coming in Chapter 3 on coupon bonds.
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