İŞLETME FİNANSI I

A bond is a debt security that contractually obligates the issuer to make fixed coupon payments at fixed intervals for a fixed amount of time plus it also pays out the face value of the bond at maturity together with the last coupon payment.

If market interest rates increase, the price of bonds decrease.

There is an inverse relationship between value of bonds and market interest rates. As market interest rates increase, the present value of future cash flows declines and the value of bond decreases. Conversely, if market interest rates decrease, the present value of future cash flows increases and the value of bond increases. It is important to note that market interest rates might change but there is no change in coupon interest rate.

Yield-to-maturity is the average rate of return that will be earned on a bond if it is bought at the market price and held until it matures. It is the discount rate that makes the present value of its future cash flows equal to its market price.

If the market rate of interest and the bond’s yield-to-maturity does not change over this period, then the bond’s rate of return will be equal to its yield-to-maturity.

The interest rates you observe in the world around you are typically nominal rates.

Yield curve plots the relationship between bond yields and maturity.

According to this model, the value of stock is equal to the present value of all future dividends that investors expect to get from that stock.

Bond prices fall when interest rates rise and bond prices rise when interest rates decrease.

It is not possible to know how much dividend the company will distribute in the future.