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Notes to BUACC5936: Notes to Bond paygrade * incline re set (also called par tax) is forever and a day 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. of all time entered as negative. * No. of years is always N * needful/ pass judgment enjoin is always I/Y The current pass judgment commit of wages on chemical bond is also called Yield to Maturity (YTM). YTM is the run off (yield) the investor stop expect if they buy the bond today and chair until maturity. Notes to valuation of Bonds, Preference and Equity * When r = expected; answer is impairment * When r = required; answer is value How to decide should we buy, divvy up or concord? Two possible techniques: * Compare value vs. price (dollars with dollars) * Compare required place with expected enume go vern (% with %) When: * Value > Price = BUY (The plus/ protection is vote down 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: * necessary 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% a! nnually 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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