Investor%20cashflow%20valuation

Investor%20cashflow%20valuation - Stock and Bond Valuation...

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FIN 3134 Bond & Stock Valuation 1 Stock and Bond Valuation Basics Formulas t r FV PV ) 1 ( g r C Perpetuity PV ) ( r) + (1 1 - 1 r C = ) PV(Annuity t t C 1  1 - r) + (1 r C = ) FV(Annuity t r g g r y growannuit PV 1 1 ) ( 1 - m interest of rate quoted + 1 = ER n Growing Annuity • Annuities are a constant cash flow over time • Growing annuities are a constant growth cash flow over time t r g g r C PV 1 1 1
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FIN 3134 Bond & Stock Valuation 2 Review: Bond Features Coupon Payments: Regular interest payments – Semi annual for most US corporate bonds – Types of Coupon payments Fixed Rate 8% per yea Fixed Rate: 8% per year Floating Rate: 6-mo. Treasury bill rate + 100 basis points. Face or Par Value: $1,000/bond Maturity: no. of years from issue date until principal is paid Coupon Rate Bond Valuation t t YTM) + (1 Par + YTM) + (1 1 - 1 YTM C = Value Bond Annuity Formula What is the price of a $1000 bond maturing in ten years with a 12% coupon that is paid semiannually if the YTM is 10% 62 124 1 ) 05 . 0 1 ( 000 , 1 ) 05 . 0 1 ( 1 1 05 . 0
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This note was uploaded on 11/16/2011 for the course FIN 3134 taught by Professor Ddklock during the Spring '08 term at Virginia Tech.

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Investor%20cashflow%20valuation - Stock and Bond Valuation...

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