7
Bond Valuation and the Structure of Interest Rates
Learning Objectives
Describe the market for corporate bonds and three types of corporate bonds.
Explain how to calculate the value of a bond and why bond prices vary negatively with interest rate movements.
Distinguish between a bond's coupon rate, yield to maturity, and effective annual yield.
Explain why investors in bonds are subject to interest rate risk and why it is important to understand the bond theorems.
Discuss the concept of default risk and know how to compute a default risk premium.
Describe the factors that determine the level and shape of the yield curve.
On April 23, 2010, the Greek government officially asked the European Union and International Monetary Fund for a bailout package that would consist of loans totaling ...
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