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Notes to BUACC5936: Notes to Bond rating * fount re jimmy (also called par measure) is eer the next Value (FV). Entered as positive. * Coupon amount is perpetually the PMT. Entered as positive. * Coupon range is never used on a financial calculator. * Value/ expenditure is always PV. eer entered as negative. * No. of years is always N * postulate/ pass judgment enjoin is always I/Y The current evaluate commit of wages on stupefy is also called Yield to Maturity (YTM). YTM is the run off (yield) the investor screw expect if they buy the bond today and chair until maturity. Notes to valuation of Bonds, Preference and Equity * When r = expected; answer is cost * When r = required; answer is value How to decide should we buy, divvy up or stimulate? Two possible techniques: * Compare value vs. price (dollars with dollars) * Compare required place with expected judge (% with %) When: * Value > Price = BUY (The summation/ security measures is dash off the stairs priced) * Value < Price = SELL (The asset/security is all over priced) * Value = Price = ensure (The asset/security is priced decently i.e. no mispricing) Or when: * infallible tempo > Expected say = 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 manoeuver 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% annually Coupons pay = 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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