Beruflich Dokumente
Kultur Dokumente
FUNDAMENTALS
OF FINANCIAL
MARKETS
What Do Interest
Rates Mean and
What Is Their Role
in Valuation?
i = YTM =?
Two Characteristics
1. Understates yield to maturity; longer the maturity,
greater is understatement
2. Change in discount yield always signals change
in same direction as yield to maturity
© 2012 Pearson Education. All rights reserved. 3-15
Bond Page of the Newspaper
If i = 5% and pe = 0% then
ir = 5% 0%= 5%
If i = 10% and pe = 20% then
i 10% to 11%:
─ Table 3.4, 10% coupon bond
i 10% to 11%:
─ 20% coupon bond, DUR = 5.72 years