Foundations of Finance: Bonds and the Term Structure of Interest Rates Prof. Alex Shapiro 1 Lecture Notes 12 Bonds and the Term Structure of Interest Rates: Pricing, Yields, and (No) Arbitrage I. Readings and Suggested Practice Problems II. Bonds Prices and Yields (Revisited) III. The Term Structure of Interest Rates (The Yield Curve) IV. Theories of the Term Structure V. Additional Readings Buzz Words: YTM, IRR, Current Yield, Discount/Premium relative to Par, Default Risk, Credit Ratings, Forward Rates, Expectations Theory, Liquidity Premium TheoryFoundations of Finance: Bonds and the Term Structure of Interest Rates 2 I. Readings and Suggested Practice Problems A. BKM, Chapter 14. We covered the essentials of this chapter in Lecture Notes 3. Still, a review is useful before discussing the term structure of interest rates and bond portfolio management. You are NOT required to read the After-Tax Returns discussion on p. 434. Suggested Problems: 3, 4, 31 b, c, d, e, g, h, k, l. B. BKM, Chapter 15. Suggested Problems: 8, 13,
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