Search results “Price of bonds face value”

Investing in bonds can be tricky in today's market. Understanding the fundamental concepts associated with bonds is a good place to start.

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Religare

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What is a Bond?
Basically, a bond is a certificate which proves that a company borrowed money from you and now owes you money. Owning a bond is a way to earn interest payments instead of putting your money in a bank.
Therefore, if a bond can give you high interest coupon payments compared to bank interest payments, a bond value should be high.
On the other hand, if a bond will give you small coupon payments compared to bank interest, the bond value should be low.
A bond can be bought either from the original company which issues the bond, or from people who already bought the bond from the corporation, but who want to sell the bond before it expires because they don’t want to wait too long before they get back their original investment
So to find the theoretical value of a bond, we need to think about the bond’s interest coupon payments compared to bank interest payments, the bond’s face value, and the length of time before maturity when you get back the full face value of the bond.
Sears Bond photo credit: Tom Spree via Wikipedia Creative Commons

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MBAbullshitDotCom

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In this lesson, we began to understand the important terms that truly value a bond. Since most investors will never hold a bond throughout the entire term, understanding how to value the asset becomes very important. As we get into the second course of this website, a thorough understanding of these terms is needed. So, be sure to learn it now and not jump ahead.
We learned that there are two ways to look at the value of a bond, simple interest and compound interest. As an intelligent investor, you'll really want to focus on understanding compound interest. The term that was really important to understand in this lesson was yield to maturity. This term was really important because it accounted for almost every variable we could consider when determining the true value (or intrinsic value) of the bond. Yield to Maturity estimates the total amount of money you will earn over the entire life of the bond, but it actually accounts for all coupons, interest-on-interest, and gains or losses you'll sustain from the difference between the price you pay and the par value.

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Preston Pysh

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Spoon Feed Me

A brief demonstration on calculating the price of a bond and its YTM on a financial calculator

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Friendly Finance with Chandra S. Bhatnagar

This video will show you how to calculate the bond price and yield to maturity in a financial calculator.
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This video shows how to calculate the issue price of a bond that pays semiannual interest. The issue price is the sum of: (1) the present value of the face value of the bond, which is to be paid when the bond matures, and (2) the present value of the interest payments. Because the bond pays interest semiannually, the interest rate should be divided by two and the number of periods should be adjusted (e.g., if it is a 10-year bond, there would be 20 periods because interest is paid twice a year). The video provide formulas to calculate the present values and illustrates the computations using an example.
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Why bond prices move inversely to changes in interest rate. Created by Sal Khan.
Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/treasury-bond-prices-and-yields?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
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Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy.
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Khan Academy

Before we moved onto valuing and reporting long term bonds I thought that I would provide a quick summary of bonds issued at a discount, premium or at par.
The stated rate is also known as the coupon rate, or face rate. The market rate is also known as the effective rate and is the rate at which you can get other very similar or identical financial instruments (for example, a bond may have been issued at a 4% coupon rate, 1 year later the market rate for those bonds might have shifted to 6%).
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Notepirate

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Bond Pricing - Bonds have coupon payments and principal repayments that all occur in the future. Therefore the way to find the present value of a bond is to compare the dollars that are to be received in the future with dollars today. For example, if someone offered you $100 today and you could invest it in an account that earned 10% per year; how much would the account be worth one year from now? This is pretty simple. It would be worth $100 X 1.10% = $110. What we are essentially saying is that $110 one year in the future is equivalent to $100 today. What would $100 today be worth two years from now at a 10% interest rate? It would be worth $100 X 1.10 X 1.10 = $100 X 1.10^2 = $121. So $121 two years from today would be worth $100 today. These examples are just to help you understand the valuation of bonds conceptually. If someone told you they would give you $121 two years from today, how would you figure out what that $121 would be worth today? If the interest rate is 10% and you would receive this payment two years from today then the present value would be calculate as follows: $121/(1.21^2) = $100. What we just did was discount $121 by the interest rate which we rose to the power of 2 because it was to be received 2 years from today.
OK, you now have a conceptual understanding but this needs to be explained in more detail. Remember, with a bond you are receiving multiple coupon payments in the future and a repayment of the principle at the maturity date. To find the present value of a bond you would have to discount all the future coupon payments and the final repayment of principle by the Yield to Maturity (rate offered by the market for a similar bond) and add them up.
Let's assume we have a bond with an annual coupon payment of $50 and a par value of $1000. Let's also assume that there are 3 more years until maturity and the yield to maturity (rate of similar bonds currently offer in the market) is 7%. How would we calculate the present value? First let's list all the information that is necessary to make the present value calculation.
Par Value = $1000
YTM = 7%
coupon payment = $50
periods until maturity = 3
The present value of the bond would be calculated as follows :
(50/1.07) + (50/1.07^2) + (50/1.07^3) + (1000/1.07^3) = $947.51
If this bond made semiannual payments then we would multiply the number of years remaining to maturity by 2 so there would be 6 periods. We would also divide the YTM and the coupon payments by by 2 so the YTM would be 3.5 and the coupon payments would be $25.
For example imagine that there is a semiannual bond with a par value of $1000, a coupon rate of 5% and still has 3 years until it reaches maturity. Now imagine that the YTM is 7%. How would we calculate the present value of this bond?
We need to find the number of payment periods, the amount of the payments and the YTM for each period. If there are 3 years left to maturity and the payments are made semiannually then there are 6 payment periods remaining. If the bond pays a 5% annual coupon and the par value is $1000 then it pays .05 X $1000 = $50 in interest payments annually. If these payments are made semiannually then it makes two payments per year so the coupon payments are $50/2 = $25. Finally, we would divide the YTM by 2 to get the YTM for the period so it would be 7%/2 = 3.5%.
Par Value = $1000
YTM = 3.5%
coupon payments = $25
periods to maturity = 6
The present value of the bond would be calculated as follows :
(25/1.035) + (25/1.035^2) + (25/1.035^3) + (25/1.035^4) + (25/1.035^5) + (25/1.035^6) + (1000/1.035^6) = $946.71
As you can see the present value of the bond is less than the face value. This is because the bond is paying a lower coupon rate than that which is offered by the market for a similar bond. Why would an investor purchase a bond for $1000 that only pays 5% when they could buy a similar bond that would pay 7%. There is less demand for these bonds and therefore the prices fall until they are correctly priced.
Below is an excerpt of U.S. Treasury quotes for bonds and notes from WallstreetJournal.com. The bonds have maturities up to 30 years and the notes have maturities up to 10 years. Take a look at the highlighted issue. We can see that it has a coupon rate of 1.375%. Par value is $1000 therefore it pays interest of $13.75 per year in two semiannual installments so it would make two payments of $6.88 each year. The payments are made in January and July of each year. The bid and ask prices are quoted as percentages of par value. The par value is $1000. Therefore the bid price of the highlighted issue is 100.3047% of par value which is $1003.05. The last column labeled Asked Yield is the bonds yield to maturity based on the ask price.
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before you buy US Treasury Bonds, it is important to recognize that several factors directly affect the market value of a bond. Consider these bond characteristics before you decide whether buying US Treasury Bonds:
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The Smart Investor

The coupon rate is the annual interest rate paid on a bond. It is represented as a percentage of the bond's face value. This video provides a brief explanation of what coupon rate means, and provides a visual example of how it is typically used and calculated.
Learn more at: http://marketbusinessnews.com/financial-glossary/coupon-rate/

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MBN Video Dictionary

What is the (model) price of a 10-year $1,000 face value bond with a coupon rate of 4.0% that pays semi-annually, if the yield is 6.0%? For more financial risk videos, visit our website! http://www.bionicturtle.com

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Bionic Turtle

What is Book Value, Market Value and Face Value of Share? Explained in Hindi. People often get confused between book value and market value while investing. Then Face Value further makes it complicated. Let's make it all clear.
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In this video, we have explained:
What are book value and market value of a share?
How book value and market value of a share is different from the face value of a share?
What is the difference between book value, market value and the face value of a share?
How to calculate the book value per share?
What is the market value of equity?
what is the meaning of book value, market value, and the face value?
What is the PB ratio or Price Book Ratio?
How to calculate the PB ratio?
How does PB value help to evaluate the correct value of a share?
What is the difference between book value of share and market value of the share?
How to use the PB ratio to evaluate per share value?
How to calculate face value and book value of a share of a company?
Make sure to Like and Share this video.
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Hope you liked this video in Hindi on “Book Value, Market Value, Face Value of Share”.

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Asset Yogi

In this revision video we work through some numerical examples of the inverse relationship between the market price of fixed-interest government bonds and the yields on those bonds.
Government bonds are fixed interest securities. This means that a bond pays a fixed annual interest – this is known as the coupon
The coupon (paid in £s, $s, Euros etc.) is fixed but the yield on a bond will vary
The yield is effectively the interest rate on a bond. The yield will vary inversely with the market price of a bond
1.When bond prices are rising, the yield will fall
2.When bond prices are falling, the yield will rise
- - - - - - - - -
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tutor2u

This video explains how to calculate the coupon rate of a bond when you are given all of the other terms (price, maturity, par value, and YTM) with the bond pricing formula.

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Michael Padhi

This video shows how to calculate the issue price of a bond that pays annual interest. The issue price is the sum of: (1) the present value of the face value of the bond, which is to be paid when the bond matures, and (2) the present value of the interest payments. This video provides the formulas to calculate these present values and illustrates the computations using an example.
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Edspira

Example: Let’s say you have a two year bullet bond that is initially sold with an interest rate of 5 percent and has a face value of $1000. The interest rate is quoted on an APR basis with six month compounding periods. What is the price you would pay for it?

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Jonathan Kalodimos, PhD

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In this video we show you how to calculate the value or price of a bond. We teach you the present value formula and then use examples to discount the coupon payments and principle payment to their present value. We also show you how to solve the price of a semi-annual bond. In this case you would multiply the periods by two and divide the YTM and coupon payments by 2. We also show you how to solve the accrued interest of a bond to find out what it would sell for at a date that is not on the exact coupon payment date.
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Subjectmoney

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Meaning of Bonds
When a company has to raise long term debt, one of the modes of raising the funds is by issuing debentures. For all practical reasons, a debenture and a bond are one and the same.
Bonds or debentures can be called financial Instruments which are contracts that give rise to a financial liability for one party (the one who issues such bonds) and a financial asset for the other party (the one who holds such bonds or debentures). Bond is a fixed income bearing security that provides interest at a definite rate to the investors.
When an investor acquires a bond, he expects interest over the period and the redeemable value to be received at the maturity date or redemption date. In other word, after acquiring a bond, the investor receives a stream of cash flows. The total present value of such stream of cash flow (including the present value of redeemable value) is considered as the value of such bond.
For the purpose of bond valuation the following terms must be clarified:
1. Face Value
2. Coupon Rate
3. Coupon payments
4. Issue Price
5. Market Price
6. Maturity Date
7. Redemption Price
8. Intrinsic Value
9. Callable & Puttable Bonds
10. Call Date & Call Price
11. Current Yield
12. Yield to Maturity (YTM)
13. Yield to Call (YTC) (For Callable Bonds)
14. Zero Coupon Bonds (ZCB)
15. Deep Discount Bonds (DDB)
16. Annuity Bonds
17. Bond STRIPS
18. Par Bonds, Premium Bonds and Discount Bonds
19. Convertible Bonds (OCDs & CCDs)
20. Straight Value of Convertible Bond
21. Stock Value of Convertible Bond
22. Conversion Parity Price
23. Conversion Premium
24. Clean Price & Dirty Price
Issue Price of a bond is at which a new bond is priced by the issuer. Bonds can be issued at Par, Premium or Discount.
Market Price of a bond indicates the price at which the bond can be bought or sold in the open market.
What do you mean by Coupon Rate and Coupon Payments?
Suppose a bond promises to pay interest at the rate of 8% per annum, then such rate is called “Coupon Rate”. The Coupon Rate is always applicable on the face value of the bond irrespective of its issue price or prevailing market price. For example, 9% Government of India Bonds provide half yearly interest on 30th June and 31st December. The face value of the bond is ` 1,000. The interest paid on each bond will be ` 1,000 x 9% x 6/12 = ` 45 on each of the interest payment dates. The interest payment of ` 45 during each of the months June and December are known as “Coupon Payments”.
Coupon Rate is the rate of interest attached to the bond and it applies on the face value, for example, a 9% bond with face value of ` 1,000 will have interest payments of ` 1,000 x 9% = ` 90 every year. It should be noted that the interest on bonds can be payable quarterly, half yearly or annually in general.
What is the Intrinsic Value of the Bond?
Intrinsic value of the bond is the aggregate present value of all coupon payments and the redemption amount, determined by using a discounting rate which is expected rate of return by the investor.
Maturity Date of a bond is the date at which a bond is redeemable or is due for redemption. A bond is generally redeemed at par or premium.
Bond Valuation: Basic Principle
As discussed earlier, the present value of the stream of cash flows including the present value of the redemption price is considered as the value of the bond and more specifically the intrinsic value of the bond or the fair market value of the bond (For this purpose the market price of the bond is always called as Actual Market Price and not Fair Market Price).
In order to arrive at the present value of the stream of cash flows, a discounting rate has to be used. This discounting rate is known as the desired yield rate or required yield rate. In other words the discounting rate is the required rate of return by the investor.
As generally known, increasing the discounting rate results into reduction in present value, and the decrease in discounting rate increases the present value. It can be concluded that the discounting rate or the desired yield rate and bond value are inversely related.
Face Value; Intrinsic Value & Market Value:
(Classification of the bond as Par, Premium or Discount bond)
At the time of issue:
If the bond is issued at its face value it is par bond
If issued above its face value it is premium bond
If issued below its face value it is discount bond
Once the bond is floated:
Then comparison is made among the three values:
• Face Value
• Intrinsic Value and
• Market Value.
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CA Nikhil Jobanputra

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What is PAR VALUE? What does PAR VALUE mean? PAR VALUE meaning - PAR VALUE definition - PAR VALUE explanation.
Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license.
Par value, in finance and accounting, means stated value or face value. From this come the expressions at par (at the par value), over par (over par value) and under par (under par value).
A bond selling at par is priced at 100% of face value. Par can also refer to a bond's original issue value or its value upon redemption at maturity.
The par value of stock has no relation to market value and, as a concept, is somewhat archaic. The par value of a share is the value stated in the corporate charter below which shares of that class cannot be sold upon initial offering; the issuing company promises not to issue further shares below par value, so investors can be confident that no one else will receive a more favorable issue price. Thus, par value is the nominal value of a security which is determined by the issuing company to be its minimum price. This was far more important in unregulated equity markets than in the regulated markets that exist today, where a stock issuance prices must usually be published. The par value of stock remains unchanged in a bonus stock issue but it changes in a stock split.
In accounting, the par value allows the company to put a de minimis value for the stock on the company's financial statement. Par value is also used to calculate legal capital or share capital.
Many common stocks issued today do not have par values; those that do (usually only in jurisdictions where par values are required by law) have extremely low par values (often the smallest unit of currency in circulation), for example a penny par value on a stock issued at USD$25/share. Most jurisdictions do not allow a company to issue stock below par value.
Even in jurisdictions that permit the issue of stock with no par value, the par value of a stock may affect its tax treatment. For example, Delaware permits the issue of stock either with or without a par value, but by choosing to assign a par value, a corporation may significantly reduce its franchise tax liability.
No-par stocks have "no par value" printed on their certificates. Instead of par value, some U.S. states allow no-par stocks to have a stated value, set by the board of directors of the corporation, which serves the same purpose as par value in setting the minimum legal capital that the corporation must have after paying any dividends or buying back its stock.
Also, par value still matters for a callable common stock: the call price is usually either par value or a small fixed percentage over par value.
The shares in a corporation may be issued partly paid, which renders the owner of those shares liability to the corporation for any calls on those shares up to the par value of the shares.
The term "at par" is also used when two currencies are exchanged at equal value (for instance, in 1964, Trinidad and Tobago switched from British West Indies dollar to the new Trinidad and Tobago dollar, and that switch was "at par", meaning that the Central Bank of Trinidad and Tobago replaced each old dollar with a new one).

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The Audiopedia

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This tutorial will show you how to calculate bond pricing and valuation in excel. This teaches you how to do so through using the NPER() PMT() FV() RATE() and PV() functions and formulas in excel.
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TeachExcel

Understand the dfference between a bond purchased (issued) at a discount versus a bond purchased (issued) at a premium, bond has two cash flows, (1) face value or principal amount paid at maturity and (2) interest payment (usually semi annual) based on the stated rate of interest on the bond, example shown as a cash flow diagram, present value (PV) what its worth when issued (issue date) based on discounting bonds cash flows (maturity value + interest payments) back to issue date using the market rate of interest, comparing the bonds present value to its future value (face value) determines whether the bond is purchased (issued) at a discount or premium amount, for a discount (bonds PV is less than on the bonds face value) while for a premium(amount the PV is greater than its face value), detailed example comparing amortization schedules for bond discount versus bond premium, details cash interest payments (stated rate of interest x bond face value), interest expense (market rate x carrying value of bond outstanding debt), amortized interest expense (interest payment - interest expense),subtract amortized premium to the bonds carrying value to determine the bonds new carrying value (bond amortization),

Views: 35407
Allen Mursau

Roger Philipp, CPA, CGMA, presents a basic bond issue with a face value of $1 million, term of 5 years, and stated or coupon rate of 8% in the video 11.01 - Bond Issuance Examples. He also shows the journal entries for issuance and interest payments at market rates or effective rates of 8%, then 10%, and then 6%. If the bond is issued to yield 8%, then the bond is issued at par and interest expense will equal the interest payment. If the effective interest rate is 10% then the bond is issued at a discount. Now interest expense will no longer equal the cash coupon interest paid. Roger explains how to set up the journal entry, keeping things simple for now with straight-line amortization of the bond discount.
Roger continues the problem by showing in the journal entry how the issuer’s interest expense will equal the market rate of 10%. Finally, Roger walks through the journal entries for this 8% face rate bond issued at a premium with a yield of 6%. As an advanced bonus, Roger has us consider the effects of the bond interest payments on the statement of cash flows.
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Video Transcript Sneak Peek:
Now, next page it says issuance of bonds example and we're going to go through this example. Face value of the bonds, million dollars. Term, five year versus what? Term versus serial bond which matures in installments. Stated interest rate 8%. That's how much cash I'm going to get. I'm going to get 8% of a million dollars or $80,000 in cash but what am I earning? That's a different question.
Then it says effective or market or yield is eight in example A, ten in example B, six in example C. Notice that we're going to be doing three examples. One is going to be eight, eight which is issued at par, issued at face. We don't have to worry about the discounted premium then we'll go to a discount example, then we'll go to a premium example and then life will be beautiful for you, things will make sense.

Views: 29088
Roger CPA Review

This video explains how to account for bonds issued at par in the context of financial accounting. An example is provided to illustrate the necessary journal entries.
Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com
To like us on Facebook, visit https://www.facebook.com/Edspira
Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com
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Views: 26365
Edspira

Given four inputs (price, term/maturity, coupon rate, and face/par value), we can use the calculator's I/Y to find the bond's yield (yield to maturity). For more financial risk videos, visit our website! http://www.bionicturtle.com

Views: 143371
Bionic Turtle

This is the third video in the bonds series. In this video, I run through the calculations on the issue price of a bond when the market rate is changing but the contract or face rate stays the same. I review par, premium and discount in additional to calculating the present value of the bond and the interest payments. For more help with accounting, please visit my website http://AccountingInFocus.com.

Views: 20806
Kristin Ingram

Views: 492
Cheri Bergeron

Views: 781
mattfishable

Help us make better videos: http://www.informedtrades.com/donate
Trade stocks and bonds with Scottrade, the broker Simit uses: http://bit.ly/scottrade-IT (see our review: http://bit.ly/scottrade-IT2)
KEY POINTS
1. Bond prices and bond yields move in opposite directions. When bond prices go up, that means yields are going down; when bond prices go down, this means yields are going up. Mathematically, this is because yield is equal to:
annual coupon payments/price paid for bond
A decrease in price is thus a decrease in the denominator of the equation, which in turn results in a larger number.
2. Conceptually, the reason for why a decrease in bond price results in an increase bond yields can be understood through an example.
a. Suppose a corporation issues a bond to a bondholder for $100, and with a promise of $5 in coupon payments per year. This bond thus has a yield of 5%. ($5/$100 = 5%)
b. Suppose the same corporation then issues additional bonds, also for $100 but this time promising $6 in coupon payments for year -- and thus yielding 6%.
No rational investor would choose the old bond; instead, they would all purchase the new bond, because it yielded more and was at the same price. As a result, if a holder of the old bonds needed to sell them, he/she would need to do so at a lower price. For instance, if holder of the old bonds was willing to sell it at $83.33, than any prospective buyer would get a bond that earned $5 in coupon payments on an $83.33 payment -- effectively an annual yield of 6% (5/83.33). The yield to maturity could be even higher, since the bond would give the bondholder $100 upon reaching maturity.
3. The longer the duration of the bonds, the more sensitivity there is to interest rate moves. For instance, if interest rates rise in year 3 of a 30 year bond (meaning there are 27 years left until maturity) the price of the bond would fall more than if interest rates rise in year 3 of a 5 year bond. This is because an interest in interest rates reduces the relative appeal of existing coupon payments, and the more coupon payments that are remaining, the more interest rate fluctuations will impact the price of the bond.
4. Lastly, a small note on jargon: when investors or commentators say, "bonds are up," (or down) they are referring to bond prices. "Bonds are up" thus means bond prices are up and yields are down; conversely, "bonds are down" means bond prices are down and yields are up.

Views: 67754
InformedTrades

In this lecture, we price the same standard bond given three different ratings agency ratings, which has given us three different required overall yields to get from the bond, given the changing levels of risk.
After explaining the theory of present valuing the different fixed cashflows, we then use an Excel spreadsheet to calculate the three different bond prices.
The lecture finishes with an Excel chart which displays the relationships between coupon rate, flat yield, and yield to maturity, as well as highlighting the most important concept in bond trading; when required interest rates go up, bond prices go down, and when required interest rates go down, bond prices go up.
For those who wish to know how to calculate a yield to maturity given a market bond price, see the next lecture.
Previous: http://www.youtube.com/watch?v=-tN32FU3D_k
Next: http://www.youtube.com/watch?v=hHR_GSEisRs
For financial education from London to Singapore and beyond, please contact MithrilMoney via the following website:
http://mithrilmoney.com/
This MithrilMoney lecture was delivered by Andy Duncan, CQF.
Please read our disclaimer:
http://mithrilmoney.com/disclaimer/

Views: 53338
MithrilMoney

This video shows how to calculate the issue price of a bond that pays quarterly interest. The issue price is the sum of: (1) the present value of the face value of the bond, which is to be paid when the bond matures, and (2) the present value of the interest payments. Because the bond pays interest quarterly, the interest rate should be divided by four and the number of periods should be adjusted (e.g., if it is a 10-year bond, there would be 40 periods because interest is paid four times a year). The video provide formulas to calculate the present values and illustrates the computations using an example.
Edspira is your source for business and financial education.
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To like Edspira on Facebook, visit https://www.facebook.com/Edspira
To sign up for the newsletter, visit http://Edspira.com/register-for-newsletter
Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams.
To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com
To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
To follow Michael on Facebook, visit https://www.facebook.com/Prof.Michael.McLaughlin

Views: 2376
Edspira

OMG wow! I'm SHOCKED how easy! Clicked here http://www.youtube.com/watch?v=eE-vj43wHOQ No wonder others goin crazy sharing this???
What amount is best to be willing to pay for a bond? A bond's value is driven by impending cash flows you are likely to generate by possessing the bond. Where do the prospective cash flows come from? They come from 1) the coupon payments which symbolize cash earnings for the owner of the bond, and 2) the remuneration of principal ("face value" of the bond).Utilizing the Bond Valuation Formula and presuming a 5% level of interest from a bank, a bond that has a $1,000 face value and 4% coupon rate which might grant you $4 annually for 7 years plus enable you to recoup the $1,000 face value after 7 years should in truth maintain a fair value of $941... which happens to be obviously less than the $1,000 face value. Thus even if the face value is $1,000, you must be prepared to pay a maximum of only $941 to obtain this bond.(The formula is a bit complicated and concerns an abundance of aspects, such as the yield or yield to maturity, remaining time until maturity, not to mention different variables. You ordinarily don't need to actually do calculations by yourself if you're not in business school. There are loads of accessible calculators via the internet.)What exactly does the $941 earlier mentioned suggest? If you should pay more than $941 for this bond, you would be better off depositing your dollars in the bank instead. Put differently, in case you compensate beyond $941, your rate of return for maintaining this bond could possibly be under the bank interest rate of 5%. Consequently... it would be preferable to deposit in the bank.So when a bond is obtained or sold, is it acquired or sold at the face value or at the fair value?For the most part, if it happens to be the first time a bond is being issued and sold by the issuing firm in the primary bond market, it is carried out with the face value. However, in the secondary market, in the event the bond is purchased or sold by unique people, it is exchanged at market value, which is often differ from both the face value and fair value. The market value is basically what true persons are prepared to pay or deal for the bond, whether or not this is much less or greater than the face value and/or fair value. Normally though, the market value is nearer to the fair value than to the face value. Take into account however, that in the secondary market, a large component which impacts bond price is risk as symbolized by its credit rating, and this factor is not covered in the formula used to find out how to value a bond which has been referred to above. http://www.youtube.com/watch?v=eE-vj43wHOQ http://mbabullshit.com/blog/bond-valuation-in-35-minutes/

Views: 84261
MBAbullshitDotCom

Earn up to 1 Year Free: https://bit.ly/2oul70h
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A bond is a type of loan issued to some type of entity such as a business or government by an investor.
It’s similar to borrowing money from a lender if you’ve ever purchased a home or car before.
Sometimes businesses need more money than the banks will offer them, so they issue bonds as a way to raise more capital.
Governments can also issue bonds when they need more money for things like roads or parks.
Bonds are considered safer on the risk spectrum for investments, but they also typically carry a lower return.
Benjamin Graham, author of the intelligent investor and Warren Buffets mentor, recommends holding a portfolio of 75% stocks and 25% bonds during a bull market and 75% bonds and 25% stocks during a bear market.
As opposed to other investments which are considered equity, bonds are considered debt which means that if a company goes under, it must repay all bondholders before stockholders. This is due to the fixed interest nature of the bond.
When the investor purchases a bond at what’s called the face value, they are paid interest, known as the coupon or yield.
The reason it’s referred to as coupon is because back when bonds were actually paper, investors would physically have to clip coupons to redeem their interest.
Anyway, the investor is paid a coupon on the bond until the loan is fully paid back by the issuer. This is known as the maturity date.
Interest payment frequency and the maturity date is determined prior to the purchase of the bond.
For example, if I purchase a $1,000, 3-year bond with a 5% coupon, I know I’ll receive $50 in interest each year for 3 years.
Now it’s important to note that Bonds can vary in risk and return
A AAA bond is the best bond you can buy while a Ba bond and lower are more speculative and are known as Junk bonds
When it comes to bonds, the higher the return, the higher the risk. The lower the return, the lower the risk. Bonds with a longer maturity date are also riskier and carry a higher return. Typically government bonds will be safer than corporate bonds.
When it comes to taxation, corporate bonds are taxed regularly while some bonds like municipal and other government bonds are tax-exempt.
A bond can also be secured or unsecured
With an unsecured bond, you may lose all of your investment if the company fails while with a secured bond, the company pledges specific assets to give shareholders if they fail to repay their bonds.
Although bonds are considered a “safer” investment, they still do come with risks.
When you purchase a bond, interest rates are out of your control and may fluctuate.
Interest rates are controlled by the U.S. treasury, the federal reserve, and the banking industry.
This means that if specified in your agreement, the company may be able to issue a call provision which is an early redemption of the bond.
While not always the case, companies will take advantage of lower interest rates to pay back loans early. This leaves you with a lower return than what you expected.
Bonds are also inversely proportional to interest rates so when interest rates go up, bonds go down and vice versa.
Bonds can also be traded between investors prior to its maturity date. A bond that’s traded below the market value is said to be trading at a discount while a bond trading for more than it’s face value is trading at a premium.
Bonds can be a great way to diversify your investment portfolio, however, they can also be quite complex.
You can use investment platforms like Fidelity, E-Tade, or Charles Shwabb to learn more about specific types of bonds.
For today’s video, we will be using Fidelity.
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Views: 7375
Will Armstrong

www.investmentlens.com
This video covers in detail how to price a coupon-bearing bond. It starts with an example of pricing a simple bond that makes periodic interest payments. It then shows how our example can be generalized and applied to any coupon bearing bond regardless of maturity. It also shows a closed form formula to price a bond. Finally, it shows another example of how the formula derived can be applied to price another bond. Although not necessary, users will find it helpful to watch videos on annuity and zero coupon bond before this one.

Views: 13563
finCampus Lecture Hall

Bond value definition. Analyzing the definition of key terms often provides more insight about concepts. Book value can be defined as – Net amount at which bonds are reported on the balance sheet; equals the par value of the bonds less any unamortized discount plus any unamortized premium. Bonds are a way a company can generate capital, bonds being like a loan. One difference between a bond and a loan is that loans typically very the interest rate in the negotiation process, looking for a market rate while the interest rates on a bond is set. To sell a bond where the market rate is difference then the bond rate the company will need to accept more or less money then the face amount of the bond, more or less money then will be repaid at the end of the bond term. If the market rate is greater than the bond rate the company will accept less than the face amount for the bond and if the market rate is more than the bond rate the company will require more than the face amount of the bond. This difference will result in a discount or premium to be recorded. The carrying amount of the bond will need to take into account the outstanding discount or premium.
Why Learn Accounting - Financial Accounting / Managerial Accounting
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101 Double Entry Accounting System Explained - Accounting Equation
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101 Cash vs Accrual - Cash Method / Accrual method differenc
https://youtu.be/i2O0cexCrqc?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Revenue Recognition Principle
https://youtu.be/M_pauBGz5Jc?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
Double Entry Accounting System Explained - Balance Sheet
https://youtu.be/kOItl8E3fNA?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Income Statement Introduction
https://youtu.be/1k11H8icQxc?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Accounting Objectives - Relevance Reliability Comparability
https://youtu.be/mO8tPzFmN8o?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Transaction Rules - Accounting Equation
https://youtu.be/0vy6W_WTO2I?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Transaction Throught Process / Steps - Accounting Equation
https://youtu.be/SlTo3EXDuqU?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Owner Deposits Cash Transaction Accounting Equation
https://youtu.be/lPZoImc88eU?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
101 Work Completed for Cash Transaction Accounting Equation
https://youtu.be/ll5xIHVdrVs?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
100.110 Pay Employee with Cash Transaction Accounting Equati
https://youtu.be/bSa3NuVpkwc?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
200 Debits & Credits Normal Balance - Double Entry Accounting Sy
https://youtu.be/alSWKuWPlxU?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI
200 Debits & Credits - One Rule to Rule Them All
https://youtu.be/RL3BFjL1eyE?list=PL60SIT917rv52SlrB3FFn2WMyZEkj6uBI

Views: 881
Accounting Instruction, Help, & How To

This video is a supplement to an investments course I teach. In this video I walk through the following problem:
Example: Suppose you have a risk-free bond that has a face value of $100, a two year maturity, pays a 3 percent coupon with semiannual coupons. The term structure of interest rates (via STRIPS) are provided in the table below. What is the price of the bond today? What is its YTM? What is the price of the bond in six months? What was your holding period return?
Years | APR
0.5 | 2%
1.0 | 6%
1.5 | 8%
2.0 | 10%
A pdf of the solution is available here: https://drive.google.com/file/d/0B3xxLxQB8cTzUTZqUXg3bFFIcE0/view?usp=sharing
A pdf of the solution to a similar problem is available here: https://drive.google.com/file/d/0B3xxLxQB8cTzUXBQdVpWS0NxdU0/view?usp=sharing
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General Recommendations for Finance Reading
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Fundamentals of Investments: http://amzn.to/2r9gCXC
The Intelligent Investor: http://amzn.to/2sGY6rt
A Random Walk Down Wall Street: http://amzn.to/2r9qX5N

Views: 4748
Jonathan Kalodimos, PhD

What is Par value?
The face value of a bond. Par value for a share refers to the stock value stated in the corporate charter. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. Par value for a bond is typically $1,000 or $100. Shares usually have no par value or very low par value, such as 1 cent per share. The market price of a bond may be above or below par, depending on factors such as the level of interest rates and the bond’s credit status. In the case of equity, par value has very little relation to the shares' market price.
Also known as nominal value or face value.

Views: 1061
Answer To Everything

Clicked here http://www.MBAbullshit.com/ and OMG wow! I'm SHOCKED how easy! No wonder others goin crazy sharing this???
How much is it safe to be willing to pay money for a bond?A bond's value is dictated by long run cash flows you might secure by possessing the bond. Where do the future cash flows originate?
They arrive from 1) the coupon payments which represent cash earnings for the holder of the bond, and also 2) the remuneration of principal ("face value" of a typical bond).
Employing the Bond Valuation Formula and assuming a 5% level of interest from a bank, a bond which has a $1,000 face value and 4% coupon rate that would give you $4 per annum for 7 years plus allow you to recoup the $1,000 face value after 7 years would actually maintain a fair value of $941... that is certainly unmistakably small compared to the $1,000 face value.
And so whether or not the face value is $1,000, you ought to be prepared to pay a maximum of only $941 for the bond.(The formula is a little intricate and considers lots of factors, just like yield or yield to maturity, enduring time until maturity, in conjunction with other variables. You ordinarily are not obliged to perform calculations by yourself if you happen to be not in business school. There are loads of no cost calculators online.)
What exactly does the $941 earlier mentioned show? If you pay more than $941 for this bond, you would be more advantaged depositing your dollars within a bank instead. Put another way, in case you compensate above $941, your personal rate of return for possessing this bond will certainly be less when compared to the bank interest rate of 5%. Thus... it would be far better to deposit in the bank.So when a bond is purchased or sold, is it procured or sold at the face value or at the fair value?
Routinely, if it is the initial time a bond is being issued and sold by the issuing company within the primary bond market, it's done at the face value. Having said that, in the secondary market, whenever the bond is obtained or sold by private people, it happens to be swapped at market value, which is often vary from both the face value and fair value.
The market value is in basic terms what true persons are happy to pay out or give for the bond, whether or not this is considerably less or greater compared to the face value and/or fair value. Typically though, the market value is closer to the fair value than to the face value. Take into account nonetheless, that in the secondary market, an enormous aspect which influences bond price is risk as represented by its credit rating, and this factor is not included in the formula applied to assess how to value a bond that was revealed above. http://www.youtube.com/watch?v=qgFa-3Iz9mc http://mbabullshit.com/blog/bond-valuation-in-35-minutes/
how to value a bond valuation formula

Views: 105992
MBAbullshitDotCom

What it the present value of a bond at issuance? Watch Roger Philipp, CPA, CGMA, use ‘present value’ as a verb as he explains the answer to the question in the video, 11.01 - Calculating Bond Issuance Proceeds.
The face value of the bond is a lump sum, the coupon interest is an annuity. These are summed to find the present value of a bond at issuance. Use the effective interest rate to present value both the lump sum and the annuity! But is it an annuity due or an ordinary annuity due also known as annuity in arrears? In typical joking Roger fashion, Roger helpfully pats his own backside in order to demonstrate that an annuity in arrears is paid at the end of the year, which is the case with bond interest. Roger then shows how to handle the present value factor of an annuity for a bond that pays interest semi-annually instead of annually.
What if the CPA Exam simply states a bond was issued at 101, or at 98? Roger explains what those numbers mean and how to calculate the bond issuance proceeds given only that information.
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Video Transcript Sneak Peek:
Now, how do you figure out how much to charge? How much cash should I charge you? How much cash should I charge you? How much cash should I charge you? Basically we're going to try to figure out what the carrying value or the amortized cost should be. In this case it’s a thousand net of a 100 is 900 which happens to be the cash. Here it happens to be a thousand which is a thousand. Here it happens to be a million one which is this plus this.
Okay, there could be other factors that fall into that but we've got to figure out, okay, how much should the present value of the bonds be? When you’re present valuing the bonds, there are two things we need to present value. We need to present value the face and we need to present value the interest.

Views: 16380
Roger CPA Review

The time it takes a paper savings bond to reach its face value depends upon the bond's interest rates throughout its lifetime. Learn more about your US Savings Bonds, visit http://www.savingsbonds.com/calc.

Views: 1440
Savings Bonds .com

We can solve for the price of a bond by recognizing that a coupon-bearing bond is equal to three positions: long perpetuity (coupon) + short forward start perpetuity (coupon) + long zero-coupon bond (face value). You can get a copy of the spreadsheet on the website.

Views: 2773
Bionic Turtle

Accounting for bond issued at a discount and determining effective interest rate (effective yield) and bonds issue price, the example is Corp-A issued $800,000 of 10%, 20-year bonds on (1/1/20X1), at 97(97% of par or face value), interest is payable semi-annually on (1/1) and (7/1), Corp-A uses the Effective Interest Method of amortization for bond premium or discount, Bond sells for more than face value, sells at a Premium, Case (1) is where the issue price is known along with stated rate of interest and interest payments, from this the effective yield interest rate is determined using Excel function YIELD (could use a financial calulator as well, Case (2) Bond issue price is unknown, effective yield interest rate is known and calculate the issue (sales) price of bond by using Excel Present Value functions, based on the results an amortization schedule is setup using the effective interest rate, also overview of journal enties are shown, detailed accounting by Allen Mursau

Views: 1068
Allen Mursau

An example of pricing a zero-coupon bond using the 5-key approach.

Views: 38142
Kevin Bracker

Investopedia explains:
When investors buy bonds, they essentially lend bond issuers money. In return, bond issuers agree to pay investors interest on bonds through the life of the bond and to repay the face value of bonds upon maturity. The simplest way to calculate a bond yield is divide its coupon payment by the face value of the bond. This is called the coupon rate.

Views: 17
Young Investors Network

© 2019 Exchange outlook 2018 certificate error

Current Dividend Preference. Participating Preferred Stock. Convertible Preferred Stock. Cumulative preferred stock includes a provision that requires the company to pay preferred shareholders all dividends, including those that were omitted in the past, before the common shareholders are able to receive their dividend payments. Non-cumulative preferred stock does not issue any omitted or unpaid dividends. If the company chooses not to pay dividends in any given year, the shareholders of the non-cumulative preferred stock have no right or power to claim such forgone dividends at any time in the future. Participating preferred stock provides its shareholders with the right to be paid dividends in an amount equal to the generally specified rate of preferred dividends, plus an additional dividend based on a predetermined condition. This additional dividend is typically designed to be paid out only if the amount of dividends received by common shareholders is greater than a predetermined per-share amount. If the company is liquidated, participating preferred shareholders may also have the right to be paid back the purchasing price of the stock as well as a pro-rata share of remaining proceeds received by common shareholders. Significance to Investors. Shareholder. Preferred Stock.