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    Johan Kurniawan / 141521435 Natya Nindyagitaya / 1415

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    Natya Nindyagitaya
    Bond prices move inversely with market interest rates. As interest rates increase, bond prices decrease. Bonds provide ownership-like characteristics with fixed periodic interest payments but do not provide ownership in the issuing entity. Bonds have maturity dates when the principal is repaid, while shares can appreciate or depreciate indefinitely. Bond valuation considers factors like coupon rate, maturity date, yield to maturity, call provisions, and credit risk.

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    Johan Kurniawan / 141521435 Natya Nindyagitaya / 1415

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    Natya Nindyagitaya
    41 views22 pages
    Bond prices move inversely with market interest rates. As interest rates increase, bond prices decrease. Bonds provide ownership-like characteristics with fixed periodic interest payments but do not provide ownership in the issuing entity. Bonds have maturity dates when the principal is repaid, while shares can appreciate or depreciate indefinitely. Bond valuation considers factors like coupon rate, maturity date, yield to maturity, call provisions, and credit risk.

    Original Description:

    TPMI bonds obligasi

    Original Title

    TPMI

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    Bond prices move inversely with market interest rates. As interest rates increase, bond prices decrease. Bonds provide ownership-like characteristics with fixed periodic interest payments but do not provide ownership in the issuing entity. Bonds have maturity dates when the principal is repaid, while shares can appreciate or depreciate indefinitely. Bond valuation considers factors like coupon rate, maturity date, yield to maturity, call provisions, and credit risk.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    41 views22 pages

    Johan Kurniawan / 141521435 Natya Nindyagitaya / 1415

    Uploaded by

    Natya Nindyagitaya
    Bond prices move inversely with market interest rates. As interest rates increase, bond prices decrease. Bonds provide ownership-like characteristics with fixed periodic interest payments but do not provide ownership in the issuing entity. Bonds have maturity dates when the principal is repaid, while shares can appreciate or depreciate indefinitely. Bond valuation considers factors like coupon rate, maturity date, yield to maturity, call provisions, and credit risk.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 22

    Bond

    Johan Kurniawan / 141521435


    Natya Nindyagitaya / 1415
    Bond Introduction

    Shares give ownership but bond dont but more like debenture
    Shares dont give a interest but in the way of profit or loss in the
    increase or decrease of the price share
    But bond commonly give fixed interest which called coupon
    Definiton of Bond

    Bond can be define as long-term debt that will be repayable at


    maturity with fixed interest if any.
    Long-term debt is bond while short-term debt is called bill
    Bond have maturity date
    Interest from bond is fixed if any and already settled
    Known also as fixed income securities
    Bond Code

    The bond give code to differentiate with other bond


    Example that used in Surabaya Stock Exchange in 2000s

    A A A A B B B C C D E F G
    Explenation :
    AAAA : Abbreviation of the company who release bond
    BBB : Code for bond name that issue
    CC : Interest rate (if own several interest rate) and other option
    D : Type of bonds
    E : Type of interest rate
    FG : Code from scriptless
    Serial Bond and Term Bond

    Bond can be serial bond, term bond or even combination


    Serial bonds means that the maturity date is in sequence
    Term bond means that the maturity is in the same time
    Type of Bonds

    Looks from the issuer of the bond there are several type of bond
    which are:
    Government bond
    Municipal bond
    Corporate bond
    Government Bond and Municipal Bond

    Government need a boost in financial by issuing bond


    In Indonesia can be referred as SUN ( Surat Utang Negara )
    Government bond assumes a lot safer compare to the corporate
    bond
    Municipal bond is issued by local government with the same
    motive as central government
    Corporate bond

    This bond is issue by private company that have maturity date


    with or without coupon that already settle in bond contract
    Corporate bond is protect with bond indenture
    Bond Value

    There are three bond values:


    Maturity Value (Represent face/par value)
    The promised value will be paid at the time the bond matures
    Market Value
    The selling value that listed in capital market at certain moment
    Intrinsic Value
    Intrinsic Value

    Estimation the true value of the bond


    Cant specifically calculated but can be estimate
    Intrinsic value can be determine by :
    1 2
    = + ++ +
    (1+)1 (1+)2 (1+) (1+)
    Information :
    NO = intrinsic value
    i = discount rate
    Kt = coupon from t=1 until t=n
    NJTn = Value bond in maturity date
    Intrinsic Value

    For constant coupon rate (K1=K2==Kn=K)




    = +
    1 + (1 + )
    =1
    Information :
    NO = intrinsic value
    i = discount rate
    Kt = coupon from t=1 until t=n
    NJTn = Value bond in maturity date
    Intrinsic Value

    Bond can be coupon bond and pure-discount bond


    Coupon bond is bond that pay coupon
    Coupon is interest that pay by bond in certain period, usually every half-year or
    yearly
    Pure-discount bond is bond that dont pay coupon, so bond is sale in discount
    Intrinsic value in Pure-discount bond calculated by :


    =
    (1 + )
    Information :
    NO = intrinsic value
    i = discount rate
    Kt = coupon from t=1 until t=n
    NJTn = Value bond in maturity date
    Liquidity

    Also called marketability from the bond


    It shown how fast investor can sell their bond without sacrifice
    their bond prices
    One of the parameter for calculate the liquidity of the bond is
    known as bid-ask spread
    Difference between highest demand price that investor willing to
    sell and the lowest dealer willing to buy
    Bond Proceed

    Current Yield
    Measured by the value of the coupon per year divided by the
    current bond market value
    Yield To Maturity
    Yield To Call
    Yield To Maturity

    The rate of return of bonds purchased at current market prices and kept
    to maturity
    YTM can be found by :
    1 2
    = + ++ +
    (1+)1 (1+)2 (1+) (1+)
    Information :
    YTM = yield to maturity
    NO = current market price from bond
    Kt = coupon from t=1 until t=n
    NJTn = Value bond in maturity date
    Yield To Call

    Return from bonds from now until the date the bond is withdrawn
    YTC similar to YTM with difference in time
    Call Provision

    The bond issuer would prefer to have the option of paying the
    bonds at par value before the due date
    For issues is advantage but for the investor is disadvantage
    Yield Spread

    The difference between the yield to maturity that is promised and


    the yield to maturity of a default free bond that has the same
    value of coupon and maturity time
    Default Premium
    Risk Premium
    Expected YTM (Y) can be measure by :
    + Y = Promise YTM
    = Y = Excpected YTM
    1 Pd = Probability bond will fail
    = The value of the unpaid bond
    relative to the current market price
    Bond Risk

    Risk from bond is possibility that bond will not paid (default)
    Bond rating can be use as proxy from bond risk
    Bond rating is character symbol that issued by bond rating agency
    to show the bond risk
    In Indonesia there are several bond rating agency, example :
    Moodys Investor Service Inc. PT ICRA Indonesia
    Standard & Poors (S&P) PT Fitch Ratings Indonesia
    Fitch Rating PT Pemeringkat Efek Indonesia
    Bond Rating
    Bond Valuation Theorem

    This theorem will elaborate the relation between bond prices


    reflect the changes in interest rate, maturity and coupon.
    Time to Discount Rate
    maturity
    10% 12% 14% 16% 18%
    Coupon Rate 14%

    15 1.304.243,18 1.136.217,29 1.000.000,00 888.490,88 796.336,90


    14 1.294.667,50 1.132.563,36 1.000.000,00 890.649,42 799.677,54
    13 1.284.134,25 1.128.470,97 1.000.000,00 893.153,32 803.619,50
    12 1.272.547,67 1.123.887,48 1.000.000,00 896.057,86 808.271,01
    11 1.259.802,44 1.118.753,98 1.000.000,00 899.427,11 813.759,79
    10 1.245.782,68 1.113.004,46 1.000.000,00 903.335,45 820.236,55
    1st : Bond Prices move against Market Yield

    The interest rate relationship with the bond price with fixed
    coupons is opposite
    The increasing interest rates, the decreasing bond prices

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