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The bond demand curve is the relationship between the price and the quantity of bonds that investors demand, all else equal. The price of bonds is inversely related to the yield, the demand curve implies that the higher the demand for bonds, the higher the yield. The bond demand curve slopes downward.
The coupon, i.e. the annual interest payment, equals the coupon rate multiplied by the bond's par value. The coupon rate can be calculated by dividing the annual coupon payment by the bond's par value. For example, given a $1,000 par value and a bondholder entitled to receive $50 per year, the coupon rate is 5%.
The coupon rate can be calculated by dividing the annual coupon payment by the bond's par value. Coupon Rate (%) = Coupon ÷ Bond Par Value. Current Yield (%) = Annual Coupon ÷ Bond Price. Current Yield = (Coupon Rate x Par Value) ÷ Bond Quote. =YIELD(settlement, maturity, rate, pr, redemption, frequency)
The bond valuation formula can be represented as: Price = ( Coupon × 1 ? ( 1 + r ) ? n r ) + Par Value ( 1 + r ) n . The bond value formula can be broken into two parts for better understanding. The first part is the present value of the coupons, and the second part is the discounted value of the par value.
An increase in y raises the demand for money, an increase in R reduces the demand for money, and an increase in w raises the demand for money. By the budget constraint (4), the demand for money sets the demand for bonds, bd = w?md = w?(10y?5R+.