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\author{Natalie Moore (NatalieMoore)}
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  /Title (valuing-bonds.pdf)
  /Creator (Cheatography)
  /Author (Natalie Moore (NatalieMoore))
  /Subject (Valuing bonds Cheat Sheet)
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    \vspace{-2pt}\large{\bf{\textcolor{DarkBackground}{\textrm{Valuing bonds Cheat Sheet}}}} \\
    \normalsize{by \textcolor{DarkBackground}{Natalie Moore (NatalieMoore)} via \textcolor{DarkBackground}{\uline{cheatography.com/19119/cs/8225/}}}
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  \mymulticolumn{2}{p{5.377cm}}{\bf\textcolor{white}{Cheatographer}}  \\
  \vspace{-2pt}Natalie Moore (NatalieMoore) \\
  \uline{cheatography.com/nataliemoore} \\
        \uline{\seqsplit{www}.jchmedia.com/}
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  \mymulticolumn{1}{p{5.377cm}}{\bf\textcolor{white}{Cheat Sheet}}  \\
   \vspace{-2pt}Published 19th March, 2017.\\
   Updated 19th March, 2017.\\
   Page {\thepage} of \pageref{LastPage}.
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  Measure your website readability!\\
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\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Formula key}}  \tn
% Row 0
\SetRowColor{LightBackground}
Po & = Asset's price today (at time 0) \tn 
% Row Count 1 (+ 1)
% Row 1
\SetRowColor{white}
CFn & = Cash flow expected at time t \tn 
% Row Count 2 (+ 1)
% Row 2
\SetRowColor{LightBackground}
t & = time \tn 
% Row Count 3 (+ 1)
% Row 3
\SetRowColor{white}
r & = required return. Discount rate that reflects the asset's risk. \tn 
% Row Count 5 (+ 2)
% Row 4
\SetRowColor{LightBackground}
n & = Assets life / period it distributes cash flows \tn 
% Row Count 7 (+ 2)
% Row 5
\SetRowColor{white}
\$C & = Coupon payment amount \tn 
% Row Count 8 (+ 1)
% Row 6
\SetRowColor{LightBackground}
\$M & = par value maturity amount \tn 
% Row Count 9 (+ 1)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
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\begin{tabularx}{5.377cm}{p{0.4977 cm} p{0.4977 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Required rate of return}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{The rate of return that investors expect or require an investment to earn given its risk.} \tn 
% Row Count 2 (+ 2)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Riskier = higher the return required by investors in the marketplace} \tn 
% Row Count 4 (+ 2)
% Row 2
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Purchase of investment means investor loses the opportunity to invest their money in another asset. Opportunity cost.} \tn 
% Row Count 7 (+ 3)
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\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Po = CF1/(1 + r)\textasciicircum{}1\textasciicircum{} + CF2/(1 + r)\textasciicircum{}2\textasciicircum{} + ... + CFn/(1 + r)\textasciicircum{}n\textasciicircum{}}}}  \tn 
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\begin{tabularx}{5.377cm}{p{0.74655 cm} x{4.23045 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Asset valuation basics}}  \tn
% Row 0
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\mymulticolumn{2}{x{5.377cm}}{In a market economy, ownership of an asset confers rights to stream of benefits generated by asset.} \tn 
% Row Count 2 (+ 2)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Benefits may be tangible, such as interest payments on bonds, or intangible, e.g. viewing a beautiful ring} \tn 
% Row Count 5 (+ 3)
% Row 2
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Asset value}} = present value of all its future benefits} \tn 
% Row Count 7 (+ 2)
% Row 3
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Finance theory focuses on tangible benefits, usually cash flows an asset pays over time} \tn 
% Row Count 9 (+ 2)
% Row 4
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{e.g. landlord. Incoming = Rental payments from tenants. Outgoing = Liabilities for maintaining premises, paying taxes, etc.} \tn 
% Row Count 12 (+ 3)
% Row 5
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{When selling an asset the market price should equal present value of all future net cash flows} \tn 
% Row Count 14 (+ 2)
% Row 6
\SetRowColor{LightBackground}
Step 1: & Estimate \$\$ an investment distributes over time \tn 
% Row Count 16 (+ 2)
% Row 7
\SetRowColor{white}
Step 2: & Discount expected cash payments using time value of money maths \tn 
% Row Count 18 (+ 2)
% Row 8
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Therefore pricing an asset requires knowledge of} \tn 
% Row Count 19 (+ 1)
% Row 9
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- & its future benefits \tn 
% Row Count 20 (+ 1)
% Row 10
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- & the appropriate discount rate to convert future benefits into a present value \tn 
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% Row 11
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\mymulticolumn{2}{x{5.377cm}}{{\bf{Certainty}}} \tn 
% Row Count 24 (+ 1)
% Row 12
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\mymulticolumn{2}{x{5.377cm}}{If an assets future benefits are uncertain then investors will apply a larger rate when discounting those benefits to present value} \tn 
% Row Count 27 (+ 3)
% Row 13
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\mymulticolumn{2}{x{5.377cm}}{An inverse relationship exists between risk and value} \tn 
% Row Count 29 (+ 2)
% Row 14
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\mymulticolumn{2}{x{5.377cm}}{Investors will pay a higher price for investment with more credible promise.} \tn 
% Row Count 31 (+ 2)
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\begin{tabularx}{5.377cm}{p{0.74655 cm} x{4.23045 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Asset valuation basics (cont)}}  \tn
% Row 15
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\mymulticolumn{2}{x{5.377cm}}{Riskier investments must offer higher returns} \tn 
% Row Count 1 (+ 1)
% Row 16
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\mymulticolumn{2}{x{5.377cm}}{{\bf{Marginal benefit of owning an asset}} = right to receive cash flows it pays} \tn 
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% Row 17
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\mymulticolumn{2}{x{5.377cm}}{{\bf{Marginal cost}} = opportunity cost of committing funds to this asset rather than to an equally risky alternative} \tn 
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\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond features}}  \tn
% Row 0
\SetRowColor{LightBackground}
Floating-rate bonds & Bonds that make coupon payments that vary through time. The coupon payments are usually tied to a benchmark market interest rate \tn 
% Row Count 7 (+ 7)
% Row 1
\SetRowColor{white}
 & also called variable-rate bonds \tn 
% Row Count 9 (+ 2)
% Row 2
\SetRowColor{LightBackground}
 & provide some protection against interest rate risk \tn 
% Row Count 12 (+ 3)
% Row 3
\SetRowColor{white}
 & If market interest rates increase, then eventually, so do the bond's coupon payments \tn 
% Row Count 17 (+ 5)
% Row 4
\SetRowColor{LightBackground}
 & Makes borrowers future cash obligations unpredictable \tn 
% Row Count 20 (+ 3)
% Row 5
\SetRowColor{white}
 & Risk is transferred from buyer to issuer \tn 
% Row Count 22 (+ 2)
% Row 6
\SetRowColor{LightBackground}
London Interbank Offered Rate (LIBOR) & The interest rate that banks in London charge each other for overnight loans. Widely used as a benchmark interest rate for short-term fl oatingrate debt. \tn 
% Row Count 30 (+ 8)
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\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond features (cont)}}  \tn
% Row 7
\SetRowColor{LightBackground}
Cash rate & Rate Aus banks charge each other for overnight loans \tn 
% Row Count 3 (+ 3)
% Row 8
\SetRowColor{white}
Spread & The difference between the rate that a lender charges for a loan and the underlying benchmark interest rate \tn 
% Row Count 9 (+ 6)
% Row 9
\SetRowColor{LightBackground}
 & Also called the credit spread \tn 
% Row Count 11 (+ 2)
% Row 10
\SetRowColor{white}
 & to the benchmark interest rate, according to the risk of the borrower \tn 
% Row Count 15 (+ 4)
% Row 11
\SetRowColor{LightBackground}
 & Lenders charge higher spreads for less creditworthy borrowers \tn 
% Row Count 19 (+ 4)
% Row 12
\SetRowColor{white}
Capital indexed bonds / inflation linked bonds & Issued by Aus govt, face value changes each year with inflation \tn 
% Row Count 23 (+ 4)
% Row 13
\SetRowColor{LightBackground}
Unsecured debt & Debt instruments issued by an entity backed only by faith and credit score of borrowing company \tn 
% Row Count 28 (+ 5)
% Row 14
\SetRowColor{white}
Subordinated unsecured debt & Debt instruments issued by an entity which is backed only by the credit of the borrowing entity which is paid only after senior debt is paid \tn 
% Row Count 35 (+ 7)
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\begin{tabularx}{5.377cm}{x{2.4885 cm} x{2.4885 cm} }
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\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond features (cont)}}  \tn
% Row 15
\SetRowColor{LightBackground}
Collateral & The specifi c assets pledged to secure a loan. \tn 
% Row Count 3 (+ 3)
% Row 16
\SetRowColor{white}
Mortgage bonds & A bond secured by real estate or buildings \tn 
% Row Count 6 (+ 3)
% Row 17
\SetRowColor{LightBackground}
Collateral trust bonds & A bond secured by financial assets held by a trustee \tn 
% Row Count 9 (+ 3)
% Row 18
\SetRowColor{white}
Debentures & Usually backed by property \tn 
% Row Count 11 (+ 2)
% Row 19
\SetRowColor{LightBackground}
Equipment trust certificates & A bond often secured by various types of transportation equipment \tn 
% Row Count 15 (+ 4)
% Row 20
\SetRowColor{white}
Pure discount bonds & Bonds that pay no interest and sell below par value. Also called zero-coupon bonds. \tn 
% Row Count 20 (+ 5)
% Row 21
\SetRowColor{LightBackground}
Convertible bond & A bond that gives investors the option to convert their bonds into the issuer's common stock. \tn 
% Row Count 25 (+ 5)
% Row 22
\SetRowColor{white}
Exchangeable bonds & Bonds issued by corporations which may be converted into shares of a company other than the company that issued the bonds. \tn 
% Row Count 32 (+ 7)
\end{tabularx}
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\begin{tabularx}{5.377cm}{x{2.4885 cm} x{2.4885 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond features (cont)}}  \tn
% Row 23
\SetRowColor{LightBackground}
Callable & Bonds that the issuer can repurchase from investors at a predetermined price known as the call price \tn 
% Row Count 5 (+ 5)
% Row 24
\SetRowColor{white}
Call price & The price at which a bond issuer may call or repurchase an outstanding bond from investors \tn 
% Row Count 10 (+ 5)
% Row 25
\SetRowColor{LightBackground}
Putable bonds & Bonds that investors can sell back to the issuer at a predetermined price under certain conditions \tn 
% Row Count 15 (+ 5)
% Row 26
\SetRowColor{white}
Sinking fund & A provision in a bond indenture that requires the borrower to make regular payments to a third-party trustee for use in repurchasing outstanding bonds, gradually over time \tn 
% Row Count 24 (+ 9)
% Row 27
\SetRowColor{LightBackground}
Protective covenants & Specify requirements that the borrower must meet as long as bonds remain outstanding \tn 
% Row Count 29 (+ 5)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
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\begin{tabularx}{5.377cm}{x{1.4931 cm} x{3.4839 cm} }
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\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond Vocabulary}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Fundamentally, a bond is just a loan} \tn 
% Row Count 1 (+ 1)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Bonds make interest-only payments until they mature} \tn 
% Row Count 3 (+ 2)
% Row 2
\SetRowColor{LightBackground}
Principal & The amount of money on which interest is paid \tn 
% Row Count 5 (+ 2)
% Row 3
\SetRowColor{white}
Maturity date & The date when a bond's life ends and the borrower must make the fi nal interest payment and repay the principal. \tn 
% Row Count 10 (+ 5)
% Row 4
\SetRowColor{LightBackground}
Par value (bonds) & The face value of a bond, which the borrower repays at maturity \tn 
% Row Count 13 (+ 3)
% Row 5
\SetRowColor{white}
 & Typically \$1,000 for corporate bonds \tn 
% Row Count 15 (+ 2)
% Row 6
\SetRowColor{LightBackground}
Coupon & A fixed amount of interest that a bond promises to pay investors \tn 
% Row Count 18 (+ 3)
% Row 7
\SetRowColor{white}
 & Usually semiannually \tn 
% Row Count 19 (+ 1)
% Row 8
\SetRowColor{LightBackground}
Indenture & A legal document stating the conditions under which a bond has been issued \tn 
% Row Count 22 (+ 3)
% Row 9
\SetRowColor{white}
 & Specifies dollar amount of coupon \tn 
% Row Count 24 (+ 2)
% Row 10
\SetRowColor{LightBackground}
 & Specifies when the borrower must make coupon payments \tn 
% Row Count 26 (+ 2)
% Row 11
\SetRowColor{white}
Coupon rate & The rate derived by dividing the bond's annual coupon payment by its par value. \tn 
% Row Count 29 (+ 3)
% Row 12
\SetRowColor{LightBackground}
Coupon yield & The amount obtained by dividing the bond's coupon by its current market price (which does not always equal its par value). Also called current yield \tn 
% Row Count 35 (+ 6)
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\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond Vocabulary (cont)}}  \tn
% Row 13
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Might have additional features:} \tn 
% Row Count 1 (+ 1)
% Row 14
\SetRowColor{white}
- & {\bf{Call feature}} allows the issuer to redeem the bond at a predetermined price prior to maturity \tn 
% Row Count 5 (+ 4)
% Row 15
\SetRowColor{LightBackground}
- & {\bf{Conversion feature}} grants bondholders right to redeem bonds for a predetermined number of shares of stock in borrowing firm \tn 
% Row Count 10 (+ 5)
% Row 16
\SetRowColor{white}
Premium & A bond that sells for more than its par value \tn 
% Row Count 12 (+ 2)
% Row 17
\SetRowColor{LightBackground}
 & Selling at a better than market return \tn 
% Row Count 14 (+ 2)
% Row 18
\SetRowColor{white}
 & As more investors buy the price goes up \tn 
% Row Count 16 (+ 2)
% Row 19
\SetRowColor{LightBackground}
Yield to maturity & The discount rate that equates the present value of the bond's cash flows to its market price \tn 
% Row Count 20 (+ 4)
% Row 20
\SetRowColor{white}
Discount & A bond sells at a discount when its market price is less than its par value \tn 
% Row Count 23 (+ 3)
% Row 21
\SetRowColor{LightBackground}
 & Might be offset with a built-in gain at maturity \tn 
% Row Count 25 (+ 2)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
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\begin{tabularx}{5.377cm}{p{0.4977 cm} x{4.4793 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Changes in Issuer Risk}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{When macroeconomic factors change} \tn 
% Row Count 1 (+ 1)
% Row 1
\SetRowColor{white}
- & Yields may change simultaneously on a wide range of bonds \tn 
% Row Count 3 (+ 2)
% Row 2
\SetRowColor{LightBackground}
- & Return on a particular bond can also change as market reassesses borrower's default risk (risk  issuer could default on payments) \tn 
% Row Count 7 (+ 4)
% Row 3
\SetRowColor{white}
- & Changes may be positive or negative \tn 
% Row Count 8 (+ 1)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
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\begin{tabularx}{5.377cm}{x{1.9908 cm} x{2.9862 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Issuer types}}  \tn
% Row 0
\SetRowColor{LightBackground}
Treasury bonds & Debt instruments issued by the federal government with maturities of up to 30 years \tn 
% Row Count 4 (+ 4)
% Row 1
\SetRowColor{white}
Corporate bonds & Issued by corporations \tn 
% Row Count 5 (+ 1)
% Row 2
\SetRowColor{LightBackground}
- & Finance new investments \tn 
% Row Count 6 (+ 1)
% Row 3
\SetRowColor{white}
- & Fulfil other needs \tn 
% Row Count 7 (+ 1)
% Row 4
\SetRowColor{LightBackground}
- & Range from 1 - 100 years \tn 
% Row Count 8 (+ 1)
% Row 5
\SetRowColor{white}
- & Under 10 years usually called a {\emph{note}} means the same \tn 
% Row Count 11 (+ 3)
% Row 6
\SetRowColor{LightBackground}
- & Most corporate bonds have a par value of \$1,000 and pay interest semiannually \tn 
% Row Count 15 (+ 4)
% Row 7
\SetRowColor{white}
Australian government bonds & Issued by Australian government \tn 
% Row Count 17 (+ 2)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
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\begin{tabularx}{5.377cm}{x{1.14471 cm} x{3.83229 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond Markets}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Larger than the stock market} \tn 
% Row Count 1 (+ 1)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Bond Price Quotations} \tn 
% Row Count 2 (+ 1)
% Row 2
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{bond prices are quoted as a percentage of par values} \tn 
% Row Count 4 (+ 2)
% Row 3
\SetRowColor{white}
Yield spread & The diff erence in yield to maturity between two bonds or two classes of bonds with similar maturities \tn 
% Row Count 8 (+ 4)
% Row 4
\SetRowColor{LightBackground}
Basis point & 1/100 of 1 percent; 100 basis points equal 1.000 percent \tn 
% Row Count 10 (+ 2)
% Row 5
\SetRowColor{white}
Bond ratings & Letter ratings assigned to bonds by specialized agencies that evaluate the capacity of bond issuers to repay their debts. Lower ratings signify higher default risk. \tn 
% Row Count 16 (+ 6)
% Row 6
\SetRowColor{LightBackground}
Junk bonds & Bonds rated below investment grade. Also known as high-yield bonds \tn 
% Row Count 19 (+ 3)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
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\begin{tabularx}{5.377cm}{p{0.4977 cm} p{0.4977 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Basic bond valuing equation}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Bond makes a fixed coupon payment each year} \tn 
% Row Count 1 (+ 1)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Po = C / (1 + r)\textasciicircum{}1\textasciicircum{} + C / (1 + r)\textasciicircum{}2\textasciicircum{} + ... + C / (1 + r)\textasciicircum{}n\textasciicircum{} + M / (1 + r)\textasciicircum{}n\textasciicircum{}}}}  \tn 
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
\par\addvspace{1.3em}

\begin{tabularx}{5.377cm}{p{0.4977 cm} p{0.4977 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Semiannual Compounding}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Most bonds make 2 payments a year} \tn 
% Row Count 1 (+ 1)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Po = (C / 2) / (1 + r)\textasciicircum{}1\textasciicircum{} + (C / 2) / (1 + r)\textasciicircum{}2\textasciicircum{} + ... +  (C / 2) / (1 + r)\textasciicircum{}2n\textasciicircum{} + M / (1 + r)\textasciicircum{}2n\textasciicircum{}}}}  \tn 
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
\par\addvspace{1.3em}

\begin{tabularx}{5.377cm}{p{0.4977 cm} p{0.4977 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Factors affecting bond prices}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{A bonds market price changes frequently as time passes} \tn 
% Row Count 2 (+ 2)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Term to maturity}}} \tn 
% Row Count 3 (+ 1)
% Row 2
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Whether a bond sells at a discount or a premium, its price will converge to par value (+ final interest payment) as maturity date draws near.} \tn 
% Row Count 6 (+ 3)
% Row 3
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Economic Forces}}} \tn 
% Row Count 7 (+ 1)
% Row 4
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Most important factor is prevailing market interest rate} \tn 
% Row Count 9 (+ 2)
% Row 5
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Required return}}} \tn 
% Row Count 10 (+ 1)
% Row 6
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{When required return on a bond changes, bonds price changes in opposite direction} \tn 
% Row Count 12 (+ 2)
% Row 7
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Higher bonds required return = lower its price, and vice versa} \tn 
% Row Count 14 (+ 2)
% Row 8
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{General lessons}}} \tn 
% Row Count 15 (+ 1)
% Row 9
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Bond prices and interest rates move in opposite directions} \tn 
% Row Count 17 (+ 2)
% Row 10
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Prices of long-term bonds display greater sensitivity to changes in interest rates than do prices of short-term bonds} \tn 
% Row Count 20 (+ 3)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
\par\addvspace{1.3em}

\begin{tabularx}{5.377cm}{p{0.4977 cm} x{4.4793 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Interest Rate Risk}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Risk that changes in market interest rates will move bond price} \tn 
% Row Count 2 (+ 2)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Interest rates fluctuate widely, so investors must be aware of interest rate risk} \tn 
% Row Count 4 (+ 2)
% Row 2
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Inherent in these instruments} \tn 
% Row Count 5 (+ 1)
% Row 3
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Inflation is a main factor} \tn 
% Row Count 6 (+ 1)
% Row 4
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Important because}}} \tn 
% Row Count 7 (+ 1)
% Row 5
\SetRowColor{white}
- & When investors buy financial assets, they expect these investments to provide a return that exceeds inflation rate. \tn 
% Row Count 11 (+ 4)
% Row 6
\SetRowColor{LightBackground}
- & Investors want to achieve a better standard of living by saving and investing their money \tn 
% Row Count 14 (+ 3)
% Row 7
\SetRowColor{white}
- & If asset returns do not exceed inflation investors are not better off for having invested \tn 
% Row Count 17 (+ 3)
% Row 8
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Real return}}} \tn 
% Row Count 18 (+ 1)
% Row 9
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Bond yields must offer investors a positive real return} \tn 
% Row Count 20 (+ 2)
% Row 10
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Approximately equals difference between stated or nominal return and inflation rate} \tn 
% Row Count 22 (+ 2)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
\par\addvspace{1.3em}

\begin{tabularx}{5.377cm}{p{0.4977 cm} p{0.4977 cm} }
\SetRowColor{DarkBackground}
\mymulticolumn{2}{x{5.377cm}}{\bf\textcolor{white}{Bond Markets}}  \tn
% Row 0
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Many types of bonds in modern financial markets} \tn 
% Row Count 1 (+ 1)
% Row 1
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Many bonds provide a steady, predictable stream of income} \tn 
% Row Count 3 (+ 2)
% Row 2
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Others have exotic features that make returns volatile and unpredictable} \tn 
% Row Count 5 (+ 2)
% Row 3
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Bond trading occurs in either primary or secondary market} \tn 
% Row Count 7 (+ 2)
% Row 4
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Primary market}} trading} \tn 
% Row Count 8 (+ 1)
% Row 5
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Initial sale of bonds by firms or government entities} \tn 
% Row Count 10 (+ 2)
% Row 6
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Might be through auction process} \tn 
% Row Count 11 (+ 1)
% Row 7
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{With help of investment bankers who assist bond issuers with design, marketing, and distribution of new bond issues} \tn 
% Row Count 14 (+ 3)
% Row 8
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{Once issued in primary market, investors trade them with each other in secondary market} \tn 
% Row Count 16 (+ 2)
% Row 9
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Often purchased by institutional investors who hold bonds for a long time} \tn 
% Row Count 18 (+ 2)
% Row 10
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{{\bf{Secondary market}}} \tn 
% Row Count 19 (+ 1)
% Row 11
\SetRowColor{white}
\mymulticolumn{2}{x{5.377cm}}{Because institutions hold bond for a long time, trading in bonds can be somewhat limited} \tn 
% Row Count 21 (+ 2)
% Row 12
\SetRowColor{LightBackground}
\mymulticolumn{2}{x{5.377cm}}{But bond market is large which means investors have a wide range of choices} \tn 
% Row Count 23 (+ 2)
\hhline{>{\arrayrulecolor{DarkBackground}}--}
\end{tabularx}
\par\addvspace{1.3em}


% That's all folks
\end{multicols*}

\end{document}