CFA Video: Bond Valuation
CFA Video: Bond Valuation
A 10-year bond paying 5% coupon annually with par value = $1000 is priced at $984. It still has 2 years to mature. If the 1-year and 2-year Treasury strip rates are 5% and 6% respectively, would you buy the bond?
Answer:
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Cash flows
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One year after: Coupon payment = $50
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Two years after: Coupon + Principal =
$50+$1000=$1050
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Present Value
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= 50/1.05+1050/1.062 = $982 < market price
($984)
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Therefore, NOT buy
November 2nd, 2009 in
2012 CFA Level 1, Alt. Investments, CFA - LEVEL 1, CFA Videos Posted by Editor
your english sucks
Yes, too much room for improvement! Still thanks for visiting!
Your english is just fine.
You dont need to be like them. They need to be like you.
english sucks but thanks
English is not a problem someone and Aerohit the problem is solving CFA quetions no wonder CFA instutute dont grade canditates english proficiency
don’t you receive 2 years of coupons?
Thank you, for your useful information on Bonds….and one more thing I don’t find any problem with English…..explaining concept is important than language. And you explained it very well…..Thank you once again :)
I find it as a useful stuff. Language is not a problem at all
In fact is you can’t answer yes or no because the question does not tell you the risk level of the bond compare to treasury bond. I can’t assume that all bond have higher risk than treasury bond, right?
awesome explanation!! thanks a lot for making these concepts for us very easy to understand!!
good and simple explanation. thanks for the video. ramanathan
your english is awfull
awesome explanation!! thanks a lot for making these concepts for us very easy to understand!! Language is not a problem at all keep it up
good explanation