公司理財(cái)英文版第八章

1、.Interest Rates and Bond ValuationChapter 8Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin8-1.Key Concepts and SkillsoKnow the important bond features and bond typesoUnderstand bond values and why they fluctuateoUnderstand bond ratings and what they meanoUnder

2、stand the impact of inflation on interest ratesoUnderstand the term structure of interest rates and the determinants of bond yields8-2.Chapter Outline8.1Bonds and Bond Valuation8.2Government and Corporate Bonds8.3Bond Markets8.4Inflation and Interest Rates8.5Determinants of Bond Yields8-3.8.1 Bonds

3、and Bond ValuationoA bond is a legally binding agreement between a borrower and a lender that specifies the:nPar (face) valuenCoupon ratenCoupon paymentnMaturity DateoThe yield to maturity is the required market interest rate on the bond.8-4.Bond Valuation oPrimary Principle:nValue of financial secu

4、rities = PV of expected future cash flows oBond value is, therefore, determined by the present value of the coupon payments and par value.oInterest rates are inversely related to present (i.e., bond) values.8-5.The Bond-Pricing EquationTTr)(1Frr)(11-1C Value Bond8-6.Bond ExampleoConsider a U.S. gove

5、rnment bond with as 6 3/8% coupon that expires in December 2013.nThe Par Value of the bond is $1,000.nCoupon payments are made semiannually (June 30 and December 31 for this particular bond).nSince the coupon rate is 6 3/8%, the payment is $31.875.nOn January 1, 2009 the size and timing of cash flow

6、s are:09/1/1875.31$09/30/6875.31$09/31/12875.31$13/30/6875.031, 1$13/31/128-7.Bond ExampleoOn January 1, 2009, the required yield is 5%.oThe current value is:17.060, 1$)025. 1 (000, 1$)025. 1 (11205.875.31$1010PV8-8.Bond Example: CalculatorPMTI/YFVPVNPV31.875 =2.51,000 1,060.17101,0000.063752Find th

7、e present value (as of January 1, 2009), of a 6 3/8% coupon bond with semi-annual payments, and a maturity date of December 2013 if the YTM is 5%.8-9.Bond ExampleoNow assume that the required yield is 11%. oHow does this change the bonds price?69.825$)055. 1 (000, 1$)055. 1 (11211.875.31$1010PV8-10.

8、YTM and Bond Value800100011001200130000.010.020.030.040.050.060.070.080.090.1Discount RateBond Value6 3/8When the YTM coupon, the bond trades at a discount.8-11.Bond ConceptsqBond prices and market interest rates move in opposite directions.qWhen coupon rate = YTM, price = par valueqWhen coupon rate

9、 YTM, price par value (premium bond)qWhen coupon rate YTM, price par value (discount bond)8-12.Interest Rate RiskoPrice RisknChange in price due to changes in interest ratesnLong-term bonds have more price risk than short-term bondsnLow coupon rate bonds have more price risk than high coupon rate bo

10、nds.oReinvestment Rate RisknUncertainty concerning rates at which cash flows can be reinvestednShort-term bonds have more reinvestment rate risk than long-term bonds.nHigh coupon rate bonds have more reinvestment rate risk than low coupon rate bonds.8-13.Maturity and Bond Price VolatilityCConsider t

11、wo otherwise identical bonds.The long-maturity bond will have much more volatility with respect to changes in the discount rate.Discount RateBond ValueParShort Maturity BondLong Maturity Bond8-14.Coupon Rates and Bond PricesConsider two otherwise identical bonds.The low-coupon bond will have much mo

12、re volatility with respect to changes in the discount rate.Discount RateBond ValueHigh Coupon BondLow Coupon BondParC8-15.Computing Yield to MaturityoYield to maturity is the rate implied by the current bond price.oFinding the YTM requires trial and error if you do not have a financial calculator an

13、d is similar to the process for finding r with an annuity.oIf you have a financial calculator, enter N, PV, PMT, and FV, remembering the sign convention (PMT and FV need to have the same sign, PV the opposite sign).8-16.YTM with Annual CouponsoConsider a bond with a 10% annual coupon rate, 15 years

14、to maturity, and a par value of $1,000. The current price is $928.09.nWill the yield be more or less than 10%?nN = 15; PV = -928.09; FV = 1,000; PMT = 100nCPT I/Y = 11%8-17.YTM with Semiannual CouponsoSuppose a bond with a 10% coupon rate and semiannual coupons has a face value of $1,000, 20 years t

15、o maturity, and is selling for $1,197.93.nIs the YTM more or less than 10%?nWhat is the semi-annual coupon payment?nHow many periods are there?nN = 40; PV = -1,197.93; PMT = 50; FV = 1,000; CPT I/Y = 4% (Is this the YTM?)nYTM = 4%*2 = 8%8-18.Current Yield vs. Yield to MaturityoCurrent Yield = annual

16、 coupon / priceoYield to maturity = current yield + capital gains yieldoExample: 10% coupon bond, with semi-annual coupons, face value of 1,000, 20 years to maturity, $1,197.93 pricenCurrent yield = 100 / 1197.93 = .0835 = 8.35%nPrice in one year, assuming no change in YTM = 1,193.68nCapital gain yi

17、eld = (1193.68 1197.93) / 1197.93 = -.0035 = -.35%nYTM = 8.35 - .35 = 8%, which is the same YTM computed earlier8-19.Bond Pricing TheoremsoBonds of similar risk (and maturity) will be priced to yield about the same return, regardless of the coupon rate.oIf you know the price of one bond, you can est

18、imate its YTM and use that to find the price of the second bond.oThis is a useful concept that can be transferred to valuing assets other than bonds.8-20.Zero Coupon BondsoMake no periodic interest payments (coupon rate = 0%)oThe entire yield to maturity comes from the difference between the purchas

19、e price and the par valueoCannot sell for more than par valueoSometimes called zeroes, deep discount bonds, or original issue discount bonds (OIDs)oTreasury Bills and principal-only Treasury strips are good examples of zeroes8-21.Pure Discount BondsInformation needed for valuing pure discount bonds:

20、nTime to maturity (T) = Maturity date - todays datenFace value (F)nDiscount rate (r)TrFPV)1 ( Present value of a pure discount bond at time 0:00$10$20$1TF$T8-22.Pure Discount Bonds: ExampleFind the value of a 15-year zero-coupon bond with a $1,000 par value and a YTM of 12%.11.174$)06. 1 (000, 1$)1

21、(30TrFPV00$10$20$29000, 1$308-23.Bond Pricing with a SpreadsheetoThere are specific formulas for finding bond prices and yields on a spreadsheet.nPRICE(Settlement,Maturity,Rate,Yld,Redemption, Frequency,Basis)nYIELD(Settlement,Maturity,Rate,Pr,Redemption, Frequency,Basis)nSettlement and maturity nee

22、d to be actual datesnThe redemption and Pr need to given as % of par valueoClick on the Excel icon for an example.8-24.8.2 Government and Corporate BondsoTreasury SecuritiesnFederal government debtnT-bills pure discount bonds with original maturity less than one year nT-notes coupon debt with origin

23、al maturity between one and ten yearsnT-bonds coupon debt with original maturity greater than ten yearsoMunicipal SecuritiesnDebt of state and local governmentsnVarying degrees of default risk, rated similar to corporate debtnInterest received is tax-exempt at the federal level8-25.After-tax Yieldso

24、A taxable bond has a yield of 8%, and a municipal bond has a yield of 6%.nIf you are in a 40% tax bracket, which bond do you prefer?o8%(1 - .4) = 4.8%oThe after-tax return on the corporate bond is 4.8%, compared to a 6% return on the municipalnAt what tax rate would you be indifferent between the tw

25、o bonds?o8%(1 T) = 6%oT = 25%8-26.Corporate BondsoGreater default risk relative to government bondsoThe promised yield (YTM) may be higher than the expected return due to this added default risk8-27.Bond Ratings Investment QualityoHigh GradenMoodys Aaa and S&P AAA capacity to pay is extremely strong

26、nMoodys Aa and S&P AA capacity to pay is very strongoMedium GradenMoodys A and S&P A capacity to pay is strong, but more susceptible to changes in circumstancesnMoodys Baa and S&P BBB capacity to pay is adequate, adverse conditions will have more impact on the firms ability to pay8-28.Bond Ratings -

27、 SpeculativeoLow GradenMoodys Ba and BnS&P BB and BnConsidered speculative with respect to capacity to pay. oVery Low GradenMoodys C nS&P C & DnHighly uncertain repayment and, in many cases, already in default, with principal and interest in arrears.8-29.8.3 Bond MarketsoPrimarily over-the-counter t

28、ransactions with dealers connected electronicallyoExtremely large number of bond issues, but generally low daily volume in single issuesoMakes getting up-to-date prices difficult, particularly on a small company or municipal issuesoTreasury securities are an exception8-30.Treasury Quotations8 Nov 25

29、 132:23132:24-125.14oWhat is the coupon rate on the bond?oWhen does the bond mature?oWhat is the bid price? What does this mean?oWhat is the ask price? What does this mean?oHow much did the price change from the previous day?oWhat is the yield based on the ask price?8-31.Clean versus Dirty PricesoCl

30、ean price: quoted priceoDirty price: price actually paid = quoted price plus accrued interestoExample: Consider T-bond in previous slide, assume today is July 15, 2009nNumber of days since last coupon = 61nNumber of days in the coupon period = 184nAccrued interest = (61/184)(.04*1,000) = 13.26oPrice

31、s (based on ask):nClean price = 1,327.50nDirty price = 1,327.50 + 13.26 = 1,340.76oSo, you would actually pay $1,340.76 for the bond.8-32.8.4 Inflation and Interest RatesoReal rate of interest change in purchasing poweroNominal rate of interest quoted rate of interest, change in purchasing power and

32、 inflationoThe ex ante nominal rate of interest includes our desired real rate of return plus an adjustment for expected inflation.8-33.Real versus Nominal Rateso(1 + R) = (1 + r)(1 + h), wherenR = nominal ratenr = real ratenh = expected inflation rateoApproximationnR = r + h8-34.Inflation-Linked Bo

33、ndsoMost government bonds face inflation riskoTIPS (Treasury Inflation-Protected Securities), however, eliminate this risk by providing promised payments specified in real, rather than nominal, terms8-35.The Fisher Effect: ExampleoIf we require a 10% real return and we expect inflation to be 8%, what is the nominal rate?oR = (1.1)(1.08) 1 = .188 = 18.8%oApproximation: R = 10% + 8% = 18%oBecause the real return and expected inflation are relatively high, there is a significant difference between the actual Fisher Effect and th