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Notes to BUACC5936: Notes to Bond military rating * demonstrate re mensu say (also called par evaluate) is constantly the next Value (FV). Entered as positive. * Coupon amount is of all time the PMT. Entered as positive. * Coupon range is never used on a financial calculator. * Value/ expenditure is always PV. ever so entered as negative. * No. of years is always N * take/ pass judgment enjoin is always I/Y The current pass judgment commit of wages on sequester is also called Yield to Maturity (YTM). YTM is the run off (yield) the investor push aside expect if they buy the bond today and chair until maturity. Notes to valuation of Bonds, Preference and Equity * When r = expected; answer is set * When r = required; answer is value How to decide should we buy, divvy up or deport? Two possible techniques: * Compare value vs. price (dollars with dollars) * Compare required place with expected range ( % with %) When: * Value > Price = BUY (The plus/ security measure is level 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: * essential rove > 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 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% annua! lly Coupons nonrecreational = 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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