1. TASK: Insert the appropriate word in the text below:
Deteriorates – discount – effective – fluctuate
Likewise - present value – promises - valuable
The market value of an existing bond will ___________ with changes in the market interest rates and with changes in the financial condition of the corporation that issued the bond. For example, an existing bond that ___________ to pay 9% interest for the next 20 years will become less ___________ if market interest rates rise to 10%. ___________, a 9% bond will become more valuable if market interest rates decrease to 8%. When the financial condition of the issuing corporation ___________, the market value of the bond is likely to decline as well.
___________ calculations are used to determine a bond's market value and to calculate the true or ___________ interest rate paid by the corporation and earned by the investor. Present value calculations ___________ a bond's fixed cash payments of interest and principal by the market interest rate for the bond.
2. CHECK YOUR SPEAKING
|
deteriorates |
[ dɪˈtɪə.ri.ə.reɪt ] |
погіршується |
|
discount |
[ ˈdɪskaʊnt ] |
знижка |
|
effective |
[ ɪˈfektɪv ] |
ефективний |
|
fluctuate |
[ ˈflʌk.tju.eɪt ] |
коливатися |
|
likewise |
[ ˈlaɪk.waɪz ] |
так само |
|
present value |
[ ˈpreznt ] [ ˈvæljuː ] |
поточне значення |
|
promises |
[ ˈprɒm.ɪs ] |
обіцяти |
|
valuable |
[ ˈvæljuəbl ] |
цінний |
3. SEE CORRECT ANSWER
The market value of an existing bond will fluctuate with changes in the market interest rates and with changes in the financial condition of the corporation that issued the bond. For example, an existing bond that promises to pay 9% interest for the next 20 years will become less valuable if market interest rates rise to 10%. Likewise, a 9% bond will become more valuable if market interest rates decrease to 8%. When the financial condition of the issuing corporation deteriorates, the market value of the bond is likely to decline as well.
Present value calculations are used to determine a bond's market value and to calculate the true or effective interest rate paid by the corporation and earned by the investor. Present value calculations discount a bond's fixed cash payments of interest and principal by the market interest rate for the bond.
