 |  Fundamentals of Corporate Finance, 4/e Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
Interest Rates and Bond Valuation
Learning ObjectivesAfter studying this chapter in the textbook, you should be able to:
| Describe the key features of a bond. |
| | | | Compute the yield to maturity (YTM) for a bond. |
| | | | Compute the price of a bond given its YTM, term to maturity and coupon. |
| | | | Distinguish between bond prices and YTM for semiannual coupon bonds compared to annual coupon bonds. |
| | | | List the key features that are typically outlined in the bond indenture. |
| | | | Identify the main categories of bond ratings for the major rating firms in Canada and explain what these ratings are attempting to measure. |
| | | | Explain how a stripped bond is created and calculate its price given the YTM and term. |
| | | | Be familiar with the different types of bonds and their main features. |
| | | | Distinguish between real and nominal interest rates. |
| | | | Based on the Fisher effect, calculate the real rate, the nominal rate or the inflation rate as required. |
| | | | Explain what is meant by the term structure of interest rates. |
| | | | (Appendix 7A) Give the definition of the duration of a bond and be able to calculate its value. |
| | | | (Appendix 7C) Conduct a bond refunding analysis to determine if a company should refinance its debt. |
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2002 McGraw-Hill Higher Education