Bonds I: Prices and yields
- The basics
- Bond valuation
- Prices, interest rates, and discount rates
- The yield to maturity
- The effective yield to maturity
- An example
- The big picture
- Excel section
Some people think that bonds are boring, some others think they’re for wimps. Whatever you think about them, the truth is that bonds are an asset class that financial markets could hardly live without. In this and the next two chapters we’ll discuss issues that will help you understand their risk and return characteristics, as well as many of those things you probably always wanted to know about bonds but were afraid to ask.
A bond is just a loan in which the issuer is the borrower and the buyer is the lender. The maturity date is the time ...