1
Q
consol def & formula
A
bond with no maturity
PV=C/[i_c]
2
Q
simple loan formula
A
PV=F/[(1+i)^n]
3
Q
fixed payment loan
A
PV=FP/[(1+i)^1] + … + FP/[(1+i)^n]
4
Q
coupon bond
A
PV=C/[(1+i)^1] + … + C/[(1+i)^n]
C=coupon rate * par value coupon payment
5
Q
discount (zero-coupon) bond
A
PV=F/(1+i)
6
Q
three facts about relation between coupon bond and YTM
A
- YTM=coupon rate, when coupon bond is priced at its FV
- YTM and price of bond are negatively related
- When bond price is below FV, YTM > coupon rate
7
Q
Rate of Expected Return formula
A
RET = i_c + g^e
8
Q
Prices & returns of long-term bonds are more volative than that of short-term bondscted Return formula
A
9
Q
Fisher equation
A
i_n =i_r + π
10
Q
Determinants of asset demand
A
- Wealth
- Expected return
- Risk
- Liquidity
11
Q
Determinants of bond supply
A
- Expected profitability of investment oppertunities
- Expected inflation
- Government deficit
- Interest rate and business cycle
12
Q
Shift along curve: ∆Q as a result of ∆P
Shift of curve: ∆Q at given P
A
