Principles of Managerial Finance

Return Data for Assets X and Y, 1994–2003 Asset X Asset Y Value Value Year Cash flow Beginning Ending Cash flow Beginning Ending ...

WW W CHAPTER 5 Risk and Return 261 Remember to check the book’s Web site at http://www.aw.com/gitman for additional resources, i ...

LEARNING GOALS 262 INTEREST RATES AND BOND VALUATION CHAPTER Across the Disciplines WHY THIS CHAPTER MATTERS TO YOU Accounting:Y ...

263 F ordand Ford Motor Credit Co. (FMCC), its finance unit, were frequent visitors to the corporate debt markets in 2001, selli ...

6.1 Interest Rates and Required Returns As noted in Chapter 1, financial institutions and markets create the mechanism through w ...

CHAPTER 6 Interest Rates and Bond Valuation 265 nominal rate of interest The actual rate of interest charged by the supplier of ...

266 PART 2 Important Financial Concepts Thus we concern ourselves only with therisk-free rate of interest, RF,which was defined ...

Term Structure of Interest Rates For any class of similar-risk securities, the term structure of interest ratesrelates the inter ...

FIGURE 6.3 Treasury Yield Curves Yield curves for U.S. Treasury securities: May 22, 1981; September 29, 1989; and March 15, 2002 ...

CHAPTER 6 Interest Rates and Bond Valuation 269 In other words, for U.S. Treasury securities the nominal, or risk-free, rate for ...

270 PART 2 Important Financial Concepts in Figure 6.3 was upward-sloping as a result of the expectation that the rate of inflati ...

CHAPTER 6 Interest Rates and Bond Valuation 271 term interest rates, and the equilibrium between suppliers and demanders of long ...

272 PART 2 Important Financial Concepts Because the U.S. Treasury bond would represent the risk-free, long-term security, we can ...

CHAPTER 6 Interest Rates and Bond Valuation 273 the highest risk premiums and therefore the highest returns result from securiti ...

Standard Provisions The standard debt provisionsin the bond indenture specify certain record-keeping and general business practi ...

Trustee Atrusteeis a third party to a bond indenture. The trustee can be an individual, a corporation, or (most often) a commerc ...

General Features of a Bond Issue Three features sometimes included in a corporate bond issue are a conversion fea- ture, a call ...

CHAPTER 6 Interest Rates and Bond Valuation 277 Figure 6.4 includes an excerpt from the New York Stock Exchange (NYSE) bond quot ...

278 PART 2 Important Financial Concepts a “Net Chg.” of 1.75 is given in the final column, the bond must have closed at 102 or ...

that the first three types—debentures, subordinated debentures, and income bonds—are unsecured, whereas the last three—mortgage ...