So,
the pricing of a particular bond may also vary.
Not exact matches
Although decades
of history have conclusively proved it is more profitable to be an owner
of corporate America (viz., stocks), rather than a lender to it (viz.,
bonds), there are times when equities are unattractive compared to other asset classes (think late - 1999 when stock
prices had risen so high the earnings yields were almost non-existent) or they do not fit with the
particular goals or needs
of the portfolio owner.
We define intrinsic value as the amount that would accrue to the owners
of a security if the underlying company were sold to a rational and well - informed buyer, or the company was liquidated with the proceeds distributed to security holders, or where the
particular security sells at a
price that would yield no better than a security considered ultra-safe, such as a US Treasury note or
bond» Lou Simpson
When used together, duration and convexity offer a better approximation
of the percentage
of price change resulting from a
particular change in a
bond's yield than using duration alone.
YTP is similar to YTC, except for the fact that the holder
of a put
bond can choose to sell back the
bond at a fixed
price on a
particular date.
Historically an alternative practice
of issuance was for the borrowing government authority to issue
bonds over a period
of time, usually at a fixed
price, with volumes sold on a
particular day dependent on market conditions.
The
price of a
bond is based on its interest rate, or yield, at any
particular time.
Many factors affect the value, or
price,
of a
particular bond, but the two big influences are 1) future inflation expectations (as reflected in general interest rates) and 2) the risk
of Corp A «defaulting» — not meeting its obligation to make each year the $ 50 interest payment and, eventually, repaying the $ 1,000
bond principal.
I expect that we'll be inclined to increase our exposure in long - term
bonds on any substantial
price weakness and upward yield pressure, but that inclination will be gradual and proportionate - I don't think it's useful to think
of any
particular level on say the 10 - year or the 30 - year Treasury as a «buy.»
1) Most other investments — talking about stocks,
bonds, mutual funds, etc — do not fix the cost basis and selling
price on the value
of the commodity on only two
particular days.
It can have severe effects on the
price and prospects
of a
particular bond if it is downgraded from «BBB,» which is investment grade, to «BB» which is below investment grade.
There may be several reasons for the difference between the market
price and the face value
of particular bonds: see Table 3.
The three main risks that they carry are — credit risk where the
bond issuer fails to make timely interest payments and repay the principal amount on maturity; liquidity risk where the fund manager is not able to sell his paper due to lack
of demand for a
particular security and; interest rate risk where a change in interest rate changes the
price of the
bond.