Question

2.

A)What are the 3 most important determinants of the price of a bond? Describe the effect of each.

B) What is the difference between a foreign bond (e.g a Samurai or Panda bond) and a Eurobond (e.g. a Euroyen issue).

Answer 1

A)
3 important determinants of price of bonds
1. Coupon Rate
2. YTM(Yield to Maturity)
3. Maturity

Coupon rate is directly proportional to price of bond . Higher the coupon higher the price of bond and vice versa.
YTM is inversely proportional to price.Higher the YTM lower the price and vice versa.
Higher the maturity lower the price and vice versa.

b) When the bonds are issued by a company in the currency of their domestic country are called foreign bonds. Samurai are Japanese currency denominated bonds and Panda are Chinese currency bonds.
Equrobonds are bonds which are not issued in the currency of domestic country but in foreign currency where it is borrowed.