Bennett
Definition
Bennett refers to a specific type of bond valuation model that emphasizes the relationship between bond prices and interest rates. It is used to understand how changes in market interest rates affect the value of bonds.
5 Must Know Facts For Your Next Test
- Bennett's model calculates the present value of a bond's future cash flows.
- It incorporates both coupon payments and the principal repayment at maturity.
- The model accounts for the time value of money by discounting future cash flows.
- Interest rate changes inversely affect bond prices in Bennett's model.
- Bennett's model can be used to compare bonds with different maturities and coupon rates.
Review Questions
- What does Bennett’s valuation model primarily emphasize?
- How does Bennett’s model account for the time value of money?
- Why are interest rate changes significant in Bennett’s valuation approach?
"Bennett" appears in:
Study guides (1)
Related terms
Yield_to_Maturity: The total return expected on a bond if held until it matures.
Coupon_Rate: The annual interest payment made by the issuer relative to the bond's face or par value.
Discount_Rate: The interest rate used to discount future cash flows back to their present value in bond valuation.
