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Lecture_09_student0 - Lecture 9 Bond and Stock Pricing BD...

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Lecture 9: Bond and Stock Pricing BD Chapters 4 & 5
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Topics Bond pricing Key features of bonds Bond valuation Bond yield Stock pricing Common stock pricing Preferred stock pricing
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Key Features of a Bond Par value: face amount paid at maturity Assume $1,000 Coupon interest rate: coupon payment Generally fixed Floating-rate bonds Zero-coupon bond (zeros) Maturity date: years until bond must be repaid
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Key Features of a Bond Call provision: refunding operation Gives issuer the right to call bonds for redemption Call premium: difference between call price and par value Deferred call (call protection), make-whole call Sinking Fund Provision Early Retirement of a bond issue Call in bonds for redemption or purchase on the open market Tradeoff: early call versus lower risk
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5 o o PV = C . . . + C+F (1 + r) 2 C . 0 1 2 N r C C+F C Value ... + + (1 + r)
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This note was uploaded on 06/06/2011 for the course FINA 4200 taught by Professor Wu during the Spring '08 term at UGA.

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Lecture_09_student0 - Lecture 9 Bond and Stock Pricing BD...

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