Chapter 6 introduces you to interest rates and bond valuation. In this chapter, you will learn: Know the important bond features and bond types, understand bond values and why they fluctuate, understand bond ratings and what they mean, understand the impact of inflation on interest rates, understand the term structure of interest rates and the determinants of bond yields. | Interest rates, bill and bond valuation Chapter 6 Key concepts and skills Know the important features and different types of bills and bonds Understand how bills and bonds are valued and why they fluctuate Understand bond ratings and what they mean Understand the impact of inflation on interest rates Understand the term structure of interest rates and the determinants of bond yields 6- Copyright ©2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Chapter outline Bills of exchange and bill valuation Other short-term funding instruments Bonds and bond valuation More on bond features Bond ratings Some different types of bonds Bond markets Inflation and interest rates Determinants of bond yields 6- Copyright © 2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Bills of exchange and bill valuation A bill is defined as: ‘unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer’ Face value The principal amount that is repaid at the end of the term. Also called par value. Maturity Date on which the principal amount is paid. 6- Copyright © 2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Bill of exchange: A negotiable instrument that is simply a document saying that ‘X’ will pay an amount of money to the holder of the bill at a future date. Bill values and yields If a bill has: a face value of F paid at maturity t periods to maturity; and a yield of r per period 6- Copyright © 2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of . | Interest rates, bill and bond valuation Chapter 6 Key concepts and skills Know the important features and different types of bills and bonds Understand how bills and bonds are valued and why they fluctuate Understand bond ratings and what they mean Understand the impact of inflation on interest rates Understand the term structure of interest rates and the determinants of bond yields 6- Copyright ©2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Chapter outline Bills of exchange and bill valuation Other short-term funding instruments Bonds and bond valuation More on bond features Bond ratings Some different types of bonds Bond markets Inflation and interest rates Determinants of bond yields 6- Copyright © 2011 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Bills of exchange .
