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Chapter 9: Bond Yields and Valuations

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    What is our bond paying us?
    What is our bond worth?

    Learning Objectives

    In this chapter, you will

    By the end of this chapter, you should be able to

    Let’s continue with stodgy, boring, reliable bonds

    What is our bond paying us? What is the yield? What is our bond worth? What is its valuation? We will learn how to compute the various bond yields and how to use a bond valuation technique that will be very familiar. We will see that the fixed-income nature of bonds makes predicting bond prices much more reliable than predicting stock prices. We will also discuss the yield curve and some final aspects of bond investing.

    Presentation file - Study guide

    • 9.1: Bond Yields
      Over the long sweep of time, income is the principal reward an investor receives from investing in bonds. Therefore, it is important to know the yield of our potential bond investment. What is the bond paying us?
    • 9.2: Yield Spreads and the Yield Curve
      Yield spreads are the differences in interest rates that exist among various sectors of the bond market. The yield curve is a graph that represents the relationship between a bond’s maturity and its yield at a given point in time. The yield curve has also been a reliable indicator that the economy is heading for a recession.
    • 9.3: Bond Valuations
      A bond's value is dependent upon the present value of its future cash flows. Wait, that sounds familiar! Yes, it's the Discounted Cash Flow Model. And since most bonds pay their interest and principal payments reliably, our predictions for bond valuations are also fairly reliable.
    • 9.4: Some Final Aspects of Bond Investing
      We will finish our coverage of bonds with some final aspects of bond investing including reinvestment risk, bond investment strategies, and bond laddering.
    • 9.S: Summary
      Congratulations ‒ You Have Finished Chapter 9 ‒ Bond Yields and Valuations

    This page titled Chapter 9: Bond Yields and Valuations is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Frank Paiano.

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