Bonds and Interest Rates
Objectives
- Understand interest rate risk premia
- Calculate forward rates
- Interpret the yield curve
- Understand the bankruptcy process
Reading
- Chapter 5: Interest Rates and the Yield Curve
- FedWatch Tool
Interest Rates
Why do Interest Rates Matter?
APR vs Effective Annual Rate
Calculate Effective Annual Rate
Yield to Maturity in Excel
Interest Rate Risk Premiums
Inflation
Default Risk
Interest Rate Risk / Maturity Risk
Liquidity Risk
Bonds
Intro to Bonds
The Yield Curve
Introduction
Understanding the Yield Curve
The Yield Curve @ Yale in 2009
00:00 - Defining Yield
09:07 - Assessing Market Interest Rate from Treasury Bonds
35:46 - Zero Coupon Bonds and the Principle of Duality
50:31 - Forward Interest Rate
70:05 - Calculating Prices in the Future and Conclusion