2. The Time Value of Money and Bond Valuation

In this section

• 2.1 Understanding the Time Value of Money
  • Present Value and Future Value Concepts in Bonds and Fixed Income Securities
    Explore the principles of present and future value in bond markets, essential for mastering bond pricing and investment strategies.
  • Discounting Cash Flows in Bond Valuation
    Master the concept of discounting cash flows to determine the present value of future payments, crucial for bond valuation and investment strategies.
  • Compounding Interest in Bonds and Fixed Income
    Explore the intricacies of compounding interest in bonds and fixed income securities, understanding its impact on investment growth and valuation.
• 2.2 Bond Pricing Fundamentals
  • Bond Pricing: Calculating the Price of a Bond
    Learn how to calculate the price of a bond by understanding the bond pricing formula, discount rates, and the impact of market interest rates on bond valuation.
  • Understanding the Relationship Between Bond Prices and Yields
    Explore the intricate inverse relationship between bond prices and yields, and learn how market interest rate changes impact bond valuation. Understand bond premiums and discounts with illustrative graphs and examples.
  • Bond Pricing Conventions and Accrued Interest: Mastering Clean and Dirty Prices
    Explore the intricacies of bond pricing conventions and accrued interest, essential for mastering bond markets and optimizing investment strategies.
• 2.3 Yield Measures, Spot Rates, and Forward Rates
  • Yield to Maturity (YTM): Understanding Bond Returns and Calculations
    Explore the concept of Yield to Maturity (YTM), a crucial measure of bond returns, and learn how to calculate it using practical examples and financial tools.
  • Current Yield Explained: Understanding Bond Income and Market Price
    Explore the concept of current yield in bonds, its calculation, significance, and comparison with other yield measures like Yield to Maturity (YTM).
  • Yield to Call and Yield to Put
    Explore yield to call and yield to put as key measures of return for bonds with embedded options, with comprehensive explanations, formulas, and examples.
  • Spot Rate Curve: Understanding and Application in Bond Valuation
    Explore the concept of the spot rate curve, its role in the term structure of interest rates, and its application in bond pricing and valuation.
  • Forward Rate Analysis in Bond Markets
    Explore forward rate analysis in bond markets, understand the relationship between spot rates and forward rates, and learn how to calculate forward rates from spot rates using the expectations theory.