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But what happens in the market is not as simple as that. According to Handy, in addition to these factors, there are other factors that make investors provide different offerings in the secondary market.

“Determinants of bond prices is the biggest factor is interest rates,” he explained.

Continuing the illustration above, if when he bought bonds earlier in the second year, where interest rates have decreased to as low as 6%, then the movement of bond prices in the secondary market will depend largely on expectations of interest rate trends.

Illustration like this, if investors are speculating the future trend of interest rates will go down, call it to the level of 5%, then he will put up bidding to buy at prices above the price of Par.

“In this way, he will have a YTM of getting bigger in the future in line with the downward trend in interest rates,” said Handy.

Conversely, if investors are projecting the future interest rates will go up, call it to the level of 8%, then the consequences will be receiving the projected yield will decrease.

“Therefore, to still get a big yield, he would put the price bid under Par,” said Handy.

Handy explained that the simple formula as follows:

If SBI is projected to decline, YTM will decrease, then prices will tend to rise.
If BI is projected to rise, YTM will go up, then prices will tend to fall.

Therefore, further Handy, to play bonds in the secondary market, investors should pay attention to the calculation of projected trends in interest rates. Therefore, the trend in interest rates greatly affect the movement of bond prices in the secondary market.

“Factors to be considered is the trend of inflation in the future. Therefore, the trend of inflation go hand in hand with the trend of interest rates (SBI). If inflation rises, the SBI will go up also, conversely, if inflation goes down, then SBI will come down anyway,” he said .

Well, talk about the macro economic conditions in the future Indonesia, said the latest projections into the second half of 2010 will be a global economic recovery. This recovery will certainly include Indonesia in it.

“Economic recovery is usually accompanied by rising inflation which of course will cause an increase in interest rates higher,” said Handy.

By simple logic, it can be assumed, in the future will happen, which means higher interest rates would make bonds YTM products has increased as well.

Then the consequences will be a decline in bond prices in the secondary market ahead of the second half of 2010.

“The decline in prices and the adjustment as it already started to happen from now. Investors seem to have anticipated the projected rise in interest rates early on. For investors who speculate in interest rates will rise right in the second semester, it would be better to buy now because prices are still high, thus received YTM will be greater,

The term is often associated terminal value as a salvage value (residual value). The residual value needs to be predicted for an existing project expiration. Suppose the power plant project to the age of 25 years. Before deciding to invest and set the value of the project, the analyst needs to calculate how the residual value of the project after 25 years to come. How to calculate the residual value can use the approximate liquidation value. Therefore, the assumption during the period of prediction is required. The better the assumptions made, the more accurate the calculation anyway.

The use of different terminal value with the use of residual value. Terminal value is used for the company, which no final age or maturity. In accordance with the going concern principle of accounting, a company, or SBU, assumed to live on. Therefore, the residual value can not be used, and used as a measure of terminal value.

In principle, the terminal value is the value the company at some point in time in the future. Determination of the period for calculation of terminal value does not depend on the age of the book or the economic life of an asset, but based on FCFE growth pattern, which is the result of the analysis in step 4. Terminal value calculation time point is where the growth or the gt has reached a constant growth rate.

For example, after six years of steady growth is assumed, then the terminal value is calculated at the end of the sixth year. Likewise, if the FCFE growth is assumed to stabilize at the end of the year to 20, then the terminal value is calculated at the end of the 20th year.

mortgage rates go down and down it? Though the BI rate already dropped to 8.25%. Instead of BI’s benchmark rate for banks to determine interest rates both deposits and loans? These comments are often out of the community. Not only consumer lending rates, lending rates are also the same as working capital. Still have not seen any decrease.

Why did this happen?

Bank is an intermediary institution that is an institution that collects funds from the public (third party funds) and returned to communities in need through loans. Third-party funds in the form of savings, current accounts and deposits. Among the three products is usually the highest deposit interest rates is because there is a period of 1, 3, 6 or 12 months.

Determination of loan interest rates are influenced by many factors, including liquidity, interest costs (cost of funds) to fund a third party. Current deposit rates in the market is still in numbers ranging from 10% – 13%. Interest rates are not only offered by private banks that liquidity problems but also by the large banks are also a red plates bank liquidity problems that in fact no bandwagon to raise interest rates so as not to be abandoned customer deposits. Funds of funds is called expensive. This makes the bank has interest costs (cost of funds) high that interest rates are very difficult to be lowered.

One of the other alternatives in terms of anticipated shortage of liquidity is the Interbank Money Market (interbank). We recommend that banks with excess liquidity lend funds to banks in need so it does not happen again unfair competition in the market. But this seems not easy because the banks with more liquidity would not lend their funds because there is no guarantee the funds will be returned. During the bank’s funding needs are not met then as long as it also deposit rates will remain high and interest rates are also engaging high. Monetary authorities in this Bank Indonesia should take immediate steps for liquidity drought could be overcome so that the bank can re-run its intermediary function because the current credit as well so went along dragging.

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