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Current yield is the ratio of annual interest payment and bond price. Learn how to calculate it, its shortcomings, and its relationship with yield to maturity and coupon yield.
Given: 0.5-year spot rate, Z1 = 4%, and 1-year spot rate, Z2 = 4.3% (we can get these rates from T-Bills which are zero-coupon); and the par rate on a 1.5-year semi-annual coupon bond, R3 = 4.5%. We then use these rates to calculate the 1.5 year spot rate. We solve the 1.5 year spot rate, Z3, by the formula below:
Duration is a measure of the average time until fixed cash flows from a financial asset, such as a bond, or the price sensitivity to yield. Learn how to calculate Macaulay duration and modified duration, and the differences between them.
Here’s a look at zero-coupon bonds, what they are and how they work. Skip to main content. 24/7 Help. For premium support please call: 800-290-4726 more ways to ...
Learn how to calculate the yield to maturity (YTM) of a fixed-interest security, which is the theoretical rate of return for an investor who holds it to maturity. Find out the main assumptions, variants, and consequences of YTM, and see examples of zero-coupon and coupon bonds.
A zero-coupon bond is a bond that does not pay interest or coupons, but only the face value at maturity. Learn about its features, uses, taxes, and how to calculate its price and yield.
A forward rate is the future yield on a bond, calculated using the yield curve. Learn how to extract the forward rate using different rate calculation modes (simple, yearly compounded or continuously compounded) and related instruments (forward rate agreement, floating rate note).
Z-spread is a measure of the yield spread of a bond over the zero-coupon Treasury curve. It is used to value bonds, mortgage-backed securities and credit default swaps. Learn how to calculate Z-spread and see examples.