Outline of Session Outline of Session 4
Outline of Session Outline of Session 4
Outline of Session Outline of Session 4
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What−if the Interest Rate Changes<br />
If the prevailing market interest rate for a<br />
5−year risk−free bond is 6%, then<br />
5,000 5,000 5,000 5,000 5,000 + 100,000<br />
Bond Price = + + + +<br />
5<br />
2<br />
3<br />
4<br />
( 1 + 6% ) ( 1 + 6% ) ( 1 + 6% ) ( 1 + 6% ) ( 1 + 6% )<br />
= 95,787.64 Baht<br />
If the prevailing market interest rate for a<br />
5−year risk−free bond is 4%, then<br />
5,000 5,000 5,000 5,000 5,000 + 100,000<br />
Bond Price = + + + +<br />
5<br />
2<br />
3<br />
4<br />
( 1 + 4% ) ( 1 + 4% ) ( 1 + 4% ) ( 1 + 4% ) ( 1 + 4% )<br />
= 104,451.82 Baht<br />
Last Updated: June 11, 2009 © 2009 Charn Soranakom, Ph.D. <strong>Session</strong> 4 | Slide 6 <strong>of</strong> 19
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