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Motorways valuation

But I think there is one more missing. Bonds are very sensitive to interest rates moves, as the value of coupon is fixed….


But I think there is one more missing. Bonds are very sensitive to interest rates moves, as the value of coupon is fixed. Consequently, if yields move up, the value of the bond decreases because the coupon is a fixed income. On a motorway, since tariffs are a function of inflation, an interest rate move related with inflation should have neutral effect on the NPV of the cash flows of the company. Very summarized this is the outcome of the Fisher Effect. Of course, the same argument is not valid if there is an increase in real interest rates