Introduction to the Valuation of Debt Securities

3 steps in the bond valuation process:

Step 1: Estimate the cash flow
Step 2: Determine the appropriate discount rate
Step 3: Calculate the PV of the estimated cash flow

3 situations where estimating future cash flows poses additional difficulties.

1. The principal repayment stream is not known with certainty.
2. The coupon payments are not known with certainty.
3. The bond is convertible or exchangeable into another security.

Price-yield curve 下凸曲线，横轴是市场收益利率，纵轴为市值。
溢价，折价，等价证券图。3种性质债券随成熟期的临近趋于面值。

A zero-coupon bond 一般都为半年期。计算注意：N*2, I/2, PMT/2, 其他不变。