Welcome everyone to the second week of our corporate finance course. In the last episode of the first week, we talked about the fact that now we have to apply the NPV approach in our evaluation procedure to two special cases. They're not cases, they're broad categories of cases. One to fix the income instruments in which cash flows are sort of fixed or at least contracted. And the other area will be the equity instruments where cash flows are not known but are only forecasted. We start this week with the analysis of the first area. This is the area of bonds. A bond is the instrument that is used for financing. It is issued by governments, by municipalities, by corporation. And this is actually a way of issuing public debt. So investors who buy bonds, they basically lend to issuers, to the government, to corporations, to municipalities or whoever. But this lending is organized in a special way. First of all, this lending is kind of long term. Well, maybe a very long time, up to 30 years similar to a mortgage. Well, there are some bonds that are short term, too. But this is not really in general a short term lending. But what is more important, this is the schedule of cash flows that are associated with the bond. So normally bonds pay interest in a regular payments that occur in the United States and some other countries. Semi-annually in continental European countries, annually. And then, so basically if this is the length or life of a bond, you receive coupons in between and the bullet payment at the very end. That includes the final coupon and the principle or the face or the maturity value of all the bond. Now, our main question is to what extend our approach based on NPV works here. If it does, then we can except that the observed prices of buns in the market will be close or I would say very close to those that were calculated on the basis of the PV approach. Namely, we would argue that if we have a forecast of interest rates, because we have to unfortunately discount all the coupons at their special rates, not at the same one. And if we did so, we could expect that if the NPV approach holds, then the market price of the bundle would be very close to the PV of all its cash flows. In the next episode we will go further, we will introduce some of the bond parameters and then we will indeed apply the NPV formula.