Fundamentals of Financial Management W4A3

Fundamentals of - AT&T Coupon Maturity Frequency Rating Period to mature n= interest amount Required return Price 1 AT&T 1-50.25 years 50.25th year

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Dell IBM Coupon 6.8 6.5 8.38% Maturity 5/15/2036 4/15/2038 11/1/2019 Frequency Semiannual Semiannual Semiannual Rating A A- A+ Period to mature 25.25 years 27.25 years 8 years n = 50.25 54.25 16 interest amount 34 32.5 41.9 Required return 5% 6.50% 8% Price 1060 1016.57 1307.78 1 34*{1-(1/1.025^50.25)/.025} + 1000/1.025^50.25 1-50.25 years 34 28.44 967.09 50.25th year 1000 0.29 289.15 $1,256.24 DELL price will be $1000 as there is no difference in coupon rate and required rate of return IBM 41.9*{1-(1/1.04^16)/.04} + 1000/1.04^16 1-16 years 41.9 11.65 488.23 16th year 1000 0.53 533.91 $1,022.14 2 YTM NPV at coupon rate PV 1000 Market price -1060 NPV at coupon rate -60 NPV at 5% PV 1256.24 Market price -1060 NPV at coupon rate 196.24 YTM = .025+196/256 x .034-.025 = .032 or 3.2 % Annualized YTM = 6.40% DELL NPV at coupon rate PV 1000 Market price -1016.57 NPV at coupon rate -16.57
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NPV at 5% 1-54.25 years 34 29.52 PV 1265.69 54.25th year 1000 0.26 Market price -1016.57 0.74 NPV at coupon rate
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This note was uploaded on 06/07/2011 for the course FIN 284 taught by Professor Houston during the Spring '11 term at Southeaster Oklahoma State University.

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Fundamentals of - AT&T Coupon Maturity Frequency Rating Period to mature n= interest amount Required return Price 1 AT&T 1-50.25 years 50.25th year

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