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  • Pricing Formula and Yield-To-Maturity

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    kanye
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    This document discusses pricing bonds using a formula rather than individually discounting cash flows. It notes that discounting each cash flow gets tedious with many cash flows. It introduces developing a compact pricing formula that assumes interest rates are constant over time. It also introduces the concept of perpetuities to help develop this pricing formula.

    Original Description:

    Lecture 1(1).31

    Original Title

    Lecture 1(1).31

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    This document discusses pricing bonds using a formula rather than individually discounting cash flows. It notes that discounting each cash flow gets tedious with many cash flows. It introduces developing a compact pricing formula that assumes interest rates are constant over time. It also introduces the concept of perpetuities to help develop this pricing formula.

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    © All Rights Reserved
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    8 views1 page

    Pricing Formula and Yield-To-Maturity

    Uploaded by

    kanye
    This document discusses pricing bonds using a formula rather than individually discounting cash flows. It notes that discounting each cash flow gets tedious with many cash flows. It introduces developing a compact pricing formula that assumes interest rates are constant over time. It also introduces the concept of perpetuities to help develop this pricing formula.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 1

    Pricing formula and yield-to-maturity

    When we have many CFs, discounting each


    one gets tedious
    It would be useful with a compact pricing
    formula
    To get one we will assume that interest rates
    are constant, i.e. yt = y for any t
    We also have to introduce the concept of
    perpetuities

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