Chapter 13
Accrued Interest and Dollar Prices
In the preceding chapter, the yield-to-maturity concept was developed in the context of a bond having a remaining life corresponding to whole multiples of semiannual interest periods. In such cases, the bond’s Present Value is well defined and consists solely of Principal Value free of any Accrued Interest. Such rounded calculations are adequate for all the theoretical problems discussed in this book, but it seems desirable here to go a step further.
In this chapter, therefore, we shall enlarge these concepts to cover a corporate bond having any given term to maturity. Our aim will be to illustrate the standard methods for computing the Dollar Price of any bond from its yield-to-maturity. Once we ...
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