in section 4 in this handout are assignments by next Tuesday.
#6-3,5,6,8,11, 19 on page257
You may group with the maximum 3 members for your assignments.
All answers should
be neatly written. Otherwise, no points
1. Bond Valuation
When a company (or government) wishes
to raise capital from the public on a long-term
capital comes in two forms: bonds and stock. Today's topic is the valuation of
As you can see in the picture in the last page, bonds have the following features.
Par value (:face value, maturity value, principle amount), denoted
Interest payment (called coupon payrnent), denoted by INT
Maturilv date with which the number of period to maturity (denoted by N) is
Call provision (for corporate bonds and municipal bonds) if applicable.
of "discounted future values," the
Recall the global valuation formula:
You may have noticed that since the above equation is the
"Asset Value" or "Valuation" is nothing but "PV" or finding PV.
You want to utilize the above formula for the valuation of bond!