fI bond valuation prices and yields

Question 1

ytm

Answer 1

typically more than 0
>0 if yields are 0 (souver bonds)

bond IRR

Question 2

flat price

Answer 2

clean price, when a bond is priced between coupon dates investor should get smth for the wait of coupon

dirty price = clean price + accrued interests

Question 3

Accrued interest

Answer 3

AI = time from last coupon/ time between coupons * PMT

należna część kuponu

Question 4

full price of the bond

Answer 4

FV of cash flows and *(1+r)^(t/T)

t- time that past from the coupon
T - time of a coupon

Full=Flat+AI

Question 5

coupon effect

Answer 5

the lower the coupon the more price sensitive it would be to changes in rates

Question 6

maturity effect

Answer 6

the bigger the tenor the more PV will change when YTM will change

exception very low coupon very low tenor selling at a discount

Question 7

constant yield price trajectory

Answer 7

bond price changes with a passage of time

2. prem and disc bonds are pulled to par

Question 8

convexity effect