Chapter 6
Valuing Bonds
I. Chapter Outline
The following chapter outline is correlated to the PowerPoint Lecture Slides. The PowerPoint slides
are referenced in bold. Alternative Examples to selected textbook examples are also available in the
PowerPoint Lecture Slides and are also referenced in bold.
6.1 Bond Cash Flows, Prices, and Yields (Slide 7)
• Bond Terminology (Slides 7–8)
• Zero-Coupon Bonds (Slides 9–10)
– Yield to Maturity (Slides 11–13)
• Example 6.1 Yields for Different Maturities (Slides 14–15)
• PowerPoint Alternative Example 6.1 (Slides 16–17)
– Risk-Free Interest Rates (Slides 18–19)
6.2 Dynamic Behavior of Bond Prices (Slide 36)
• Discounts and Premiums (Slides 37–39)
• Table 6.1 Bond Prices Immediately After a Coupon Payment (Slide 39)
• Example 6.5 Determining the Discount or Premium of a Coupon Bond (Slides 40–44)
• PowerPoint Alternative Example 6.5 (Slides 45–47)
• Time and Bond Prices (Slide 48)
• Example 6.6 The Effect of Time on the Price of a Coupon Bond (Slides 49–53)
• Figure 6.1 The Effect of Time on Bond Prices (Slide 54)
• Interest Rate Changes and Bond Prices (Slides 55–56)
6.3 The Yield Curve and Bond Arbitrage (Slide 63)
• Replicating a Coupon Bond (Slides 64–66)
• Table 6.2 Yields and Prices (per $100 Face Value) for Zero-Coupon Bonds
Berk/DeMarzo • Corporate Finance, Fourth Edition, Global Edition 23
• Valuing a Coupon Bond Using Zero-Coupon Yields (Slide 67)
• Coupon Bond Yields (Slides 68-69)
6.4 Corporate Bonds (Slide 74)
• Corporate Bond Yields (Slides 75–83)
– No Default (Slide 76)
– Certain Default (Slides 77–79)
– Risk of Default (Slides 80–82)
• Table 6.3 Bond Price, Yield, and Return with Different Likelihoods of Default (Slide 83)
• Bond Ratings (Slide 84)
• Table 6.4 Bond Ratings (Slide 85–86)
• Corporate Yield Curves (Slide 87)
6.5 Sovereign Bonds (Slide 90)
• Figure 6.5 Percent of Debtor Countries in Default or Restructuring Debt, 1800–2006 (Slide
91)
• Global Financial Crisis: European Sovereign Debt Yields: A Puzzle
• Figure 6.6 European Government Bond Yields, 1976-2015 (Slide 92)
• Interview with Carmen M. Reinhart
Chapter 6 Appendix Forward Interest Rates (Slide 96)
• Computing Forward Rates (Slides 96–101)
• Example 6A.1 Computing Forward Rates (Slides 102–103)
II. Learning Objectives
6.2 Calculate the yield to maturity for both coupon and zero-coupon bonds, and interpret its
meaning for each.
6.3 Given coupon rate and yield to maturity, determine whether a coupon bond will sell at a
6.5 Discuss the effect of coupon rate to the sensitivity of a bond price, to changes in interest rates.
