Introduction to Debt Securities
Bonds
Bond Pricing - Annual payment. - Click Here
What is price of this annual payment bond?
Our Strategy: We calculate the bond price in three equivalent ways. First, we will calculate the bond price as the present value of the bond’s cash flows. Second, we use a formula for the bond price. Third, we use Excel’s PV function for a bond price.
Bond Duration - EAR and APR. - Click Here
What is price of this bond based on the Effective Annual Rate (EAR) convention? What is price of this bond based on the Annual Percentage Rate (APR) convention?
Our Strategy: We create an option button that can be used to select either the EAR or APR rate convention. The choice of rate convention will determine the discount rate / period. For a given discount rate / period, we will calculate the bond price in four equivalent ways. First, we will calculate the bond price as the present value of the bond’s cash flows. Second, we use a formula for the bond price. Third, we use Excel’s PV function for a bond price.