Pricing a Bond with Yield To Maturity, Lecture 013, Securities Investment 101, Video 00015

In this lecture, we price the same standard bond given three different ratings agency ratings, which has given us three different required overall yields to get from the bond, given the changing levels of risk.

After explaining the theory of present valuing the different fixed cashflows, we then use an Excel spreadsheet to calculate the three different bond prices.

The lecture finishes with an Excel chart which displays the relationships between coupon rate, flat yield, and yield to maturity, as well as highlighting the most important concept in bond trading; when required interest rates go up, bond prices go down, and when required interest rates go down, bond prices go up.

For those who wish to know how to calculate a yield to maturity given a market bond price, see the next lecture.

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This MithrilMoney lecture was delivered by Andy Duncan, CQF.

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