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TABLE OF CONTENTS
Unit 9: Fixed Income Securities
Introduction...............................................................................................9-1
Unit Objectives ........................................................................................9-1
Introduction to Bond Pricing and Yield Mathematics...........................9-2
U.S. Treasury Bills.......................................................................9-2
Pricing U.S. Treasury Bills ............................................. 9-3
Calculating the Discount Rate ....................................... 9-4
Rate of Return.................................................................. 9-4
Summary.......................................................................... 9-6
Practice Exercise 9.1 .............................................................................9-9
U.S. Treasury Notes................................................................. 9-11
Pricing U.S. Treasury Notes ....................................... 9-11
Calculating Yield to Maturity........................................ 9-13
U.S. Treasury Bonds................................................................ 9-14
Call Provision ............................................................... 9-14
Summary................................................................................... 9-15
Practice Exercise 9.2 .......................................................................... 9-17
Eurobonds ................................................................................ 9-19
Other Bonds.............................................................................. 9-21
Accrued Interest ....................................................................... 9-21
Bond Price Quotes .............................................................................. 9-23
Treasury Bill Quotes................................................................. 9-23
Treasury Note and Bond Quotes............................................ 9-25
Summary................................................................................... 9-27
Practice Exercise 9.3 .......................................................................... 9-29
Duration................................................................................................. 9-33
Factors That Affect Bond Prices ............................................ 9-33
Duration of a Bond ................................................................... 9-34
Duration of a Portfolio.............................................................. 9-37
Duration Relationships ............................................................ 9-38
Summary................................................................................... 9-39