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Explain what a bond is and discuss its nature as a "fi xed income" security.Discuss important terms in relation to bonds as the "price", "maturity", "current yield", "yield to maturity", "par", "premium" and "discount", "present value" and "face value", ...
Describe yield curves in relation to bonds and explain the so-called 'expectations theory'. Explain ratings and default risks for bonds. Explain how to include the probability of default in the pricing of bonds.
Look in the Financial Times, Wall Street Journal or some other major nancial newspaper for bonds and study their quotation style. Pick examples and relate as much as possible to what you have learned making use of the mathematical techniques introduced in the lectures.
Q. Display the position explicitly Example: I borrow 7800000 HKD at time t = t 0 at an interest rate r t0 . After one year I pay back 7800000(1 + rt o ). At
Beta Beta is a measure of the market risk, or methodical risk, of a particular privacy or portfolio. Systematic risk defines any risk that influences the value of a huge numbe
Explain the purchasing power parity, both of the absolute and relative versions. What causes the deviations from the purchasing power parity? Answer: The absolute version of p
Briefly discuss some variants of the basic interest rate and currency swaps. Answer: In place of the basic fixed-for-floating interest rate swap, there are as well zero-coupo
Bond's potential returns are calculated using measures like Yield to Maturity (YTM) and cash flow yield. Both these measures are not free from s
Q. Explain Net Present Value Method? Net Present Value (NPV) Method: - This process measures the Present value of returns per rupee invested. In this method present value of
#what are the main points in scope or contents of financial functions#
discuss cost of capital in finance#
Loans from the financial institutions: Financial institutions such as the commercial bank life insurance corporation, industries financial development corporation bank of the
After determining the expected cash flows and appropriate interest rate, the last step in the valuation process is to find the total PV of all cash flows. The PV
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