Bond Prices and Yields Flashcards
1
Q
How are bonds priced?
A
- Each bond has a fixed nominal value, often £100 for a sterling bond
2
Q
What is the relationship between interest rates and bond prices?
A
- There is an inverse relationship between interest rates and bond price when bonds are traded
3
Q
What are bond yields?
A
- The return to investor from the bond’s coupon (interest) payments.
4
Q
How do you calculate bond yeilds?
A
Coupon/ Market Price x 100
5
Q
What is a flat yield?
A
- The most straightforward yield is to look at the coupon paid on a bond as a percentage of its market price
6
Q
How do you calculate the flat yield?
A
Annual coupon/ Bonds market price x 100
7
Q
A
