英语翻译
ZERO-COUPON BONDS A zero-coupon bond (also called a pure-discount bond) is a bond that makes no payments until its maturity.Its par value,which is paid at maturity,is the combined repayment of principal and all the interest over the bond's life.Despite the seeming difference,Equation (5.1) can be used to value a zero-coupon bond,or to determine its YTM.
EXAMPLE Computing the YTM of a J.C.Penney Zero-Coupon Bond
J.C.Penney has a zero-coupon bond that will pay $1,000 at maturity in exactly 20 years.The bond is selling for $178.43.What is its YTM?
Using Equation (5.1) with semiannual compounding6 and CPN/2 = 0
The r12 that solves this is 4.40,so the YTM is 8.8% (= 2[4.4]).
Review
1.A recent bond quote provides a good estimate of a bond’s value.How else can you estimate the value of a bond?
2.What is the fair price of a Texaco bond that has an 8% coupon rate,a required return of 10%,matures in exactly 4 years?
3.What is a yield to maturity (YTM)?How do you compute it?
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