Bond Prices - Forward Rates - Holding Period Returns
Channel: Jonathan Kalodimos, PhD
Date: 2016-05-11

This video is a supplement to an investments course I teach. In this video I walk through the following problem:

Example: Suppose you have a risk-free bond that has a face value of $100, a two year maturity, pays a 3 percent coupon with semiannual coupons. The term structure of interest rates (via STRIPS) are provided in the table below. What is the price of the bond today? What is its YTM? What is the price of the bond in six months? What was your holding period return?

Years  |    APR
0.5      |       2%
1.0      |       6%
1.5      |       8%
2.0      |     10%

A pdf of the solution is available here: https://drive.google.com/file/d/0B3xxLxQB8cTzUTZqUXg3bFFIcE0/view?usp=sharing

A pdf of the solution to a similar problem is available here: https://drive.google.com/file/d/0B3xxLxQB8cTzUXBQdVpWS0NxdU0/view?usp=sharing

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General Recommendations for Finance Reading
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Fundamentals of Investments: http://amzn.to/2r9gCXC
The Intelligent Investor: http://amzn.to/2sGY6rt
A Random Walk Down Wall Street: http://amzn.to/2r9qX5N