FINA 2700 Lecture Notes - Lecture 6: Dbrs, Microsoft Powerpoint, Credit Risk
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Web sites of major newspapers: usually the coupons are percentages, the $ value of a coupon coupon % x the face value of the bond, ex. 10% of 1000 is 100$, coupon payment each period is . This is the discount rate: the dis(cid:272)ou(cid:374)t (cid:396)ate (cid:373)ust (cid:272)aptu(cid:396)e the (cid:271)o(cid:374)d"s oppo(cid:396)tu(cid:374)ity (cid:272)ost of (cid:272)apital. The current rate of interest on similar risk investments: the price of any asset in finance is based on the future cash flows of that asset. 2: the price of any asset in finance is the discounted future value of that asset, to calculate price of bound have to discount all the future cash flows to present value, bond is regular annuity. 7: example in a year if you receive but the payments are semiannual then first six months get 50 and then again after 6 months, the discount rate for bounds are announced nominal unlike mortgage, ex.