Bond Pricing and Yield Calculations

In this section

• Calculating Bond Prices
  Work through present value methods for pricing zero-coupon and coupon bonds.
  • Present Value of Bond Cash Flows
    See how discounting expected coupon and principal payments supports bond valuation.
  • Pricing Zero-Coupon Bonds
    Learn how zero-coupon bonds are priced from face value, discount rate, and time to maturity.
  • Pricing Coupon Bonds
    Review how coupon payments and principal repayment combine in standard bond price calculations.
• Bond Yield Measures and Calculations
  Compare the main yield measures used to evaluate bond return across different structures and assumptions.
  • Yield to Maturity (YTM)
    Understand yield to maturity as the internal rate of return implied by a bond’s current price and cash flows.
  • Yield to Call and Yield to Put
    Compare call and put yield measures when embedded options can change a bond’s expected life.
  • Effective Yield and Bond Equivalent Yield
    Learn how compounding conventions change quoted yields and how bond equivalent yield standardizes comparison.
• Day Count Conventions in Bond Analysis
  Review the calendar conventions used to measure accrued interest and coupon-period fractions in bond markets.
  • Actual/Actual (ACT/ACT) Convention
    See how the Actual/Actual method measures coupon periods using the actual number of days in each interval.
  • 30/360 and Other Day Count Methods
    Compare the 30/360 convention with other day count methods used across bond and money market instruments.
  • Why Day Count Conventions Matter
    Understand why day count choices affect pricing, accrued interest, and yield comparisons in fixed income analysis.
• Bond Pricing Between Coupon Dates
  Learn how accrued interest and quote conventions affect bond prices between scheduled coupon payments.
  • Accrued Interest Calculations
    Review how accrued interest is measured between coupon dates and added to quoted bond prices.
  • Clean Price and Dirty Price
    Understand the difference between quoted clean price and full dirty price in bond trading.
• Yield Curves and the Term Structure of Interest Rates
  Study yield curve shape, term structure theory, and curve construction in fixed income markets.
  • Understanding the Yield Curve
    Review what the yield curve shows and why its slope and shape matter in bond analysis.
  • Theories of Yield Curve Shape
    Compare the main theories used to explain why yield curves slope upward, flatten, or invert.
    • Expectations Theory
      Understand how expectations theory links long-term yields to expected future short-term interest rates.
    • Liquidity Preference Theory
      Review liquidity preference theory and why investors may demand higher yields for longer maturities.
    • Market Segmentation Theory
      Learn how market segmentation theory explains yield differences across maturity segments with distinct demand patterns.
  • Constructing a Yield Curve
    See how analysts build yield curves from observed bond yields and maturity-specific pricing data.