Valuation of bonds and stocks ppt qitvfcz

Valuation of bonds and stocks ppt

11.02.2021

Muntz22343

Maturity Date. The date when the par value is repaid. Normally expressed in years to maturity. Nper in a bond calculation. The number of periods will be equal to the number. of years if the coupon payments are made annually. The number of periods will be equal to 2 x the. number of years if the coupon payments are made. The total value of the bonds issued by a company at a certain time could be millions of dollars. 2. The market value, B. Although a bond may have a face value of $1000, it may not sell at $1000 in the bond market. If the issuing company is not doing well financially, its bonds may sell for less than $1000, perhaps at $950. Problems *Note: P1 through P5 deal with bond valuation. P6 through P11 deal with stock valuation. P1. Bennifer Jewelers just issued ten-year bonds that make annual coupon payments of $50. Suppose you purchased one of these bonds at par value ($1,000) when it was issued. Par Bond -- The coupon rate equals the market required rate of return (P0 = Par). If interest rate rise so that market required rate of return increases, the bonds price will fall. If interest rate fall, so that market required rate of return decreases, the bonds price will rise. 7-19. VALUATION (BONDS AND STOCK) The general concept of valuation is very simple—the current value of any asset is the present value of the future cash flows it is expected to generate. It makes sense that you are willing to pay (invest) some amount today to receive future benefits (cash flows). Stock Valuation Stock Features and Valuation Components of Required Return Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. 1. BONDS. 2. Introduction Bonds refer to debt instruments bearing interest on maturity. In simple terms, organizations may borrow funds by issuing debt securities named bonds, having a fixed maturity period (more than one year) and pay a specified rate of interest (coupon rate) on the principal amount to the holders.

17 Dec 2019 Cost of capital and bond and stock valuation.ppt - Free download as Powerpoint Presentation (.ppt), PDF File (.pdf), Text File (.txt) or view

Its bonds have a 12% coupon, paid semiannually, a current maturity of 20 years, and a net price of $960. The firm could sell, at par, $100 preferred stock that pays a $10 annual dividend, but flotation costs of 5% would be incurred. Rollins’ beta is 1.5, the risk-free rate is 4%, and the market return is 12%. the value of the bond is: PV of Bond = 37.50 (1.0775) t t=0.5 t=30∑ + 1,000 (1.0775) 30 = $987.62 Illustration 33.2: Valuing a seasoned straight bond The following is a valuation of a seasoned Government bond, with twenty years left to expiration and a coupon rate of 11.75%. The next coupon is due in two months. The current twenty-year bond rate is 7.5%. A bond’s coupon rate A. equals its annual coupon payment divided by the bonds’ current market price. B. varies during the life of the bond. C. equals its annual coupon payment divided by the interest rate D. equals its annual coupon payment divided by its par value.

For a discussion of the mathematics see Bond valuation. Bond markets, unlike stock or share markets, sometimes do

31 Jan 2007 Calculate the present value of the cash flows. • Valuing stock, however, is more complicated than valuing bonds because the cash flows are.

Stock Valuation Stock Features and Valuation Components of Required Return Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. 1. BONDS. 2. Introduction Bonds refer to debt instruments bearing interest on maturity. In simple terms, organizations may borrow funds by issuing debt securities named bonds, having a fixed maturity period (more than one year) and pay a specified rate of interest (coupon rate) on the principal amount to the holders. Its bonds have a 12% coupon, paid semiannually, a current maturity of 20 years, and a net price of $960. The firm could sell, at par, $100 preferred stock that pays a $10 annual dividend, but flotation costs of 5% would be incurred. Rollins’ beta is 1.5, the risk-free rate is 4%, and the market return is 12%. the value of the bond is: PV of Bond = 37.50 (1.0775) t t=0.5 t=30∑ + 1,000 (1.0775) 30 = $987.62 Illustration 33.2: Valuing a seasoned straight bond The following is a valuation of a seasoned Government bond, with twenty years left to expiration and a coupon rate of 11.75%. The next coupon is due in two months. The current twenty-year bond rate is 7.5%. A bond’s coupon rate A. equals its annual coupon payment divided by the bonds’ current market price. B. varies during the life of the bond. C. equals its annual coupon payment divided by the interest rate D. equals its annual coupon payment divided by its par value. A bond with a market value less than $1,000 is selling at a discount, and a bond, which is priced at its face value, is selling at par. The market price of a bond is usually quoted as a percentage of its face value. For instance, a bond selling at 95 is really selling at 95% of its face value, or $950.

Problems *Note: P1 through P5 deal with bond valuation. P6 through P11 deal with stock valuation. P1. Bennifer Jewelers just issued ten-year bonds that make annual coupon payments of $50. Suppose you purchased one of these bonds at par value ($1,000) when it was issued.

Download ppt "VALUATION OF BONDS AND SHARES CHAPTER 3. LEARNING OBJECTIVES Explain the fundamental characteristics of ordinary shares, NOTE: Solving a semi-annual payer for YTM results in a 6-month yield. The calculator & Excel solve what you enter. 6-25. Table 6.1. 6-26. Debt versus Equity . 17 Dec 2019 Cost of capital and bond and stock valuation.ppt - Free download as Powerpoint Presentation (.ppt), PDF File (.pdf), Text File (.txt) or view