30 terms

# Section II

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Bond(F) =
par value
Bond(r) =
coupon rate
Bond(Fr) =
coupon amount
Bond(C) =
redemption value (usually = F)
Bond(n) =
number of periods to redemption
Bond(P) =
price
Bond(i) =
yield per period to investor at price P
(Assuming F = C) Premium - Discount Formula:
P = F + F(r-i)an¬
(Assuming F = C) Makeham Formula:
P = K + (r/i)*(F - K), where K = Fv^n
Amortized amount in period k:
F(r-i)v^(n-k+1)
Maturity to use in pricing a callable bond (Premium Bond):
Earliest Possible Redemption Date
Maturity to use in pricing a callable bond (Discount Bond):
Latest Possible Redemption Date
Price Between Payment dates t=
number of days from last coupon date to settlement date / number of days in the bond period
Price-plus-accrued =
P0 (1+i)^t
Accrued interest =
t (Fr)
Price (Between Payment Dates)=
(Price-plus-accrued) - (Accrued interest)
Time Weighted Rates of Interest Ck, Bk, jk =
Ck = Contribution at time tk, Bk = Fund value at time tk, before contribution Ck is made, jk = effective rate over [t(k-1), tk]
Time Weighted Rates of Interest 1 + jk =
Bk / (B(k-1) + C(k-1)
Time Weighted Rates i =
1+j = (1+j1)(1+j2)...(1+jn)
Dollar Weighted Rate of Interest A,B,I,C =
A = Initial Fund Balance, B = Final Fund Balance, I = Interest Earned, C = Total Cash Contribution
Dollar Weighted Rate of Interest B,I, Ct =
B = A + C + I, I = B - A - C , Ct = Contributions/ Withdrawl at time t
Dollar Weighted Rate of Interest i =
I / (A + Sum(Ct(1-t)))
(Sport rates Sn, Forward rates i(n-1),n) 1 + i(n-1),n =
(1+Sn)^n / (1+S(n-1))^n-1
Macaulay Duration (Weighted Avg) D =
w1(t1) + w2(t2) + .... w1, w2 ... = (PV Pmts / PV Price)
Modified Duration (DM) =
neg (dP/Di) / P or D/(1+i)
Level Payments (D) =
(Ia)n¬ / an¬
Coupon Bond (D) =
(Fr(Ia)n¬ + nCv^n) / Bond Price
change in Price =
neg (D/(1+i)) P(i) change(i)
Portfolio (DM) =
w1 DM1 + w2 DM2 + ......
Dividend Growth Model P =
D / (i -g) D = Dividend g = growth