Nebosh

Notes to BUACC5936: Notes to Bond valuation * grammatical construction nurture ( also called par nurse) is eer the succeeding(a) apprize (FV). Entered as positive. * Coupon amount is always the PMT. Entered as positive. * Coupon station is never used on a financial calculator. * protect/ charge is always PV. Always entered as negative. * No. of years is always N * necessary/ exsert judgment pace is always I/Y The watercourse pass judgment score of cede on bond is also called Yield to Maturity (YTM). YTM is the reelect (yield) the investor can expect if they subvert the bond today and grip until maturity. Notes to valuation of Bonds, Preference and paleness * When r = expected; answer is Price * When r = undeniable; answer is value How to decide should we buy, look at or make believe? Two possible techniques: * Compare value vs. value (dollars with dollars) * Compare required stray with expected footstep (% with %) When: * prize > Price = BUY (The asset/security is chthonic priced) * Value < Price = SELL (The asset/security is everyplace priced) * Value = Price = die hard (The asset/security is priced in good order i.e. no mispricing) Or when: * Required ordinate > Expected rate = SELL (The asset/security is non providing sufficient returns i.e. its expected rate is less than what we require) * Required rate < Expected rate = BUY * Required rate = Expected rate = HOLD Problem 10-17 To seem the expected rate: * 1000 FV * 80 PMT * 15 n * -1085 PV * CPT I/Y * Answer is I/Y = 7.06% To calculate the value of the bond: * 1000 FV * 80 PMT * 15 n * 10 I/Y * CPT PV * Answer is PV = 847.88 Should we buy, sell or hold? * Since $847.88 (Value) < $1,085 (Price) = SELL * Or 10% (Required rate) > 7.06% (Expected rate) = SELL Problem 10-3 Face value = $1,000 Coupon rate = 9% annua! lly Coupons compensable = semi-annually Coupon amount = 9% x $1,000 x ½ = $45 Maturity = 8 years Required...If you want to get a full essay, order it on our website: BestEssayCheap.com

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