Chapter 9 FIXED INCOME SECURITIES: VALUATION AND RISKS • Why are bonds viable investment alternatives? • What are the risks faced by bond investors? • How bonds are priced? • What are the basic bond pricing theorems? • How can interest rate risk be measured? • How can credit risk be evaluated? • How are bond risk and required return related?
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Contemporary Investments: Chapter 9 Chapter 9 FIXED INCOME SECURITIES: VALUATION AND RISKS Why are bonds viable investment alternatives? What are the risks.
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Chapter 9 FIXED INCOME SECURITIES:
VALUATION AND RISKS• Why are bonds viable investment
alternatives?• What are the risks faced by bond
investors?• How bonds are priced?• What are the basic bond pricing
theorems?• How can interest rate risk be measured?• How can credit risk be evaluated?• How are bond risk and required return
related?
Why bonds?
• Income
• Potential for capital gains
• Paper versus real losses
• Diversification
• Tax advantages
Figure 9.1 – Yield on Long-Term Treasury Bonds vs. the Dividend Yield from the S&P500