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  3. Bond Valuation and Analysis in Python
  • 1

    Time Value of Money

    Free

    In this chapter, you’ll cover simple and compound interest, compounding frequencies, future value as well as commonly used financial functions in the NumPy-financial package.

  • 2

    Bond Prices & Yields

    Let’s get fiscal. You’ll discover how to find the price of both zero-coupon and coupon-paying bonds, as well as examining the relationship between bond prices and bond yields.

  • 3

    Duration

    Now it’s time for you to explore interest rate risk via the concept of duration, the factors affecting duration, and how to use duration to predict the price changes of a bond or hedge bond portfolios.

  • 4

    Convexity

    In the final chapter, you’ll be introduced to convexity. You’ll see how it helps address the weaknesses inherent in duration, examine the factors affecting convexity, and use both duration and convexity together to better predict bond prices.

Initializing

Exercise

Comparing coupon bond yields

Often you will be presented with several bonds with different characteristics, and it isn't clear which one has the highest yield.

In these cases, it can be helpful to find their yields in order to compare them properly, since the yield tells you which bond will give you the greatest return on your investment.

In this exercise, you will use the npf.rate() to compare three different bonds.

numpy_financial has already been imported for you as npf.

Instructions 1/4

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  • Find the yield of a three-year bond paying a 3% annual coupon with a price of USD 92.