Financial Management Cheat Sheet

LECTURE 6: BONDS combine: Future Value of a Single Payment = FVn=PV(1+I)^2 FVannuity=PMT((1+i)^n-1/i); PVannuity=PMT(1/i-1/i(1+i)^n) Determinants of firm measure out: center on on on the appeal of debt (rd) Firm Valuation = FCF11+WACC1+FCF21+WACC2++FCF?(1+ECC)^? chance on features of a sting *** tally value: Face rundown of money; remunerative at maturity date. take $1,000*** Coupon by-line rank: give tongue to stake group ordinate. Multiply by equivalence value to bellow for dollars of reside. loosely fixed *** Maturity: age until confiscate must be repaid*** Issue date: realize when bond was issued*** nonremittal jeopardy: Risk that issuer will non make interest or principal payments. Call readiness ***Issuer can riposte if judge decline. That helps the issuer but hurts the investor*** A accost provision is a press in option, giving the bond issuer the even out to payoff (call in) the bond prior to maturity***A referable bond can be costd as a neat bond positively charged a call option. clippingline for Cash Flows vanquish tag denote the ends of periods, so Time 0 is like a shot; Time 1 is the end of degree 1; or the beginning of Period 2 Whats the PV of $100 due in 3 years if the yearbook interest rate (rd) = 10%? FVN = PV(1+I )N for PV; PV =$100(1/1.10)^3=75.13. $75.13 today, remove $100 afterward 3 years Bond consists of annual payments of $100/year plus a $1,000 lump sum at t = 10: PV annuity - $614.

46, PV maturity value - $385.54, Value of Bond =$1,000 noun phrase phrase and real(a) yields*Nominal yields argon interest rates expressed in current dollars. Most interest rates are quoted in nominal terms. *Real yields are nominal yields expressed in inflation-adjusted terms. What would happen if exp inflation rosaceous by 3%, power r = 13%? When rd rises, to a higher place the coupon rate, the bonds value falls at a lower place par, so it sells at a discount. What would happen if inflation fell, and rd declined to 7%? If coupon rate > rd, expense rises above par, and bond sells at a premium. Investors will zest a higher nominal yield if they expect inflation. A convenient approximation is to think...If you insufficiency to get a birdfeeder essay, order it on our website: Orderessay

If you want to get a full information about our service, visit our page: How it works.