Valuation of Fixed Income Securities

This chapter discusses the valuation of fixed income securities. The fixed income securities we frequently encounter in corporate finance are preference shares, bonds, and debentures. The time value of money concepts discussed in Chapters 2 and 3 are core to the valuation of these securities. The chapter first discusses the valuation of irredeemable securities such as bonds, debentures, and preference shares. This is followed by a discussion of the valuation of redeemable securities such as bonds, debentures, and preference share, including securities that pay coupon interest or dividends more than once a year. The chapter concludes by discussing the value of zero coupon bonds, even though these are not fixed income securities.