Day 13-Ch 6-Part 3 & POW 6-10.17.11

Day 13-Ch 6-Part 3 & POW 6-10.17.11 -...

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Business Management 201 Day 13 Chapter 6: Part 3—Bond Valuation October 17, 2011
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Day 13 Agenda 1) Women in Finance Workshop Oct 19 6-7 PM in 710 TNRB 2) POW Quiz #6: Due Friday, October 21 at 11:59 PM 3) Midterm Exam in Testing Center: October 19-21  4) Midterm Exam Review in Class on Wednesday 5) First TA Review Sessions this Week: TA Open Lab Session—Tuesday 2:00 PM-3:00 PM in 251 TNRB TA Review Session—Tuesday 7:00 PM-8:00 PM in 3108 JKB 1) Chapter 6: Bond Valuation Discussion 2) POW #6: Citigroup Case & Duration Exercise
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Chapter 6: Chapter 6: Bond Valuation Bond Valuation
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Bonds in the  Bonds in the  Financial Pages Financial Pages
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Financial Pages: Corporate Bonds Cur                 Net Bonds                         Yld        Vol    Close             Chg Eckerd  9 1 / 4      15       8.6        20       107  1 / 2       . .. What is Eckerd’s yield to maturity (today=2011)? P/YR: 1  FV: 1000 PV: -$1,075  [107.5% x 1000 or 1.075 x 1000 = 1075] N: 8  [2015-2011 = 4; 4 yrs x 2 pmts/yr = 8] PMT: 46.25   [(0.0925 x 1000)/2 = 46.25]  I/YR: ?   7.06%        [3.5324 x 2 = 7.06%] Note:  You are using a factor  of  TWO  for the semiannual  payments so you must  double the I/Yr to find YTM! Current Yield:   Annual Coupon/Current Price 92.50/1075=0.086 CY = 8.6%
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Financial Pages: Corporate Bonds Cur           Net  Bonds                              Yld         Vol       Close      Chg AlldC  zr    20  ...         30      43  5 / 8 +2 What is Allied Chemical’s yield to maturity [Today = 2011]? P/YR: 1     [assume  annual  for zr unless comparing to  semiannual  bond] N: 9     [2020 – 2011 = 9] FV: 1000 PV: -$436.25      [5/8 = 0.625; 43.625% x 1000 or 0.43625 x 1000 =  436.25] PMT: 0   [zr is abbreviation for ZERO coupon bond] I/YR: ?   9.655%
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Financial Pages: Treasury Bonds   Maturity  Ask Rate    Mo/Yr      Bid        Asked     Chg  Yld     9   Nov  29 128:18    128:24       +13            6.43 What is the yield to maturity of this Treasury bond?  (Note:  T-bonds are traded in 32nds, Today is 2011.) P/YR: 1  N: 36     [2029 - 2011 = 18; 18 x 2 = 36] FV: 1000 PMT: 45  [0.09 x 1000 = 90; 90/2 = 45] PV: -$1,287.50     [24/32 = 0.75; 128.75% of par; 1.2875 x 1000 = 1287.50] I/YR: ?  6.31%        [3.1529 x 2 = 6.3058] Note:  As an investor, you  BUY at the “Asked” and you  SELL at the “Bid” so the PV of  the T-bond is 128:24.
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Duration Duration
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This note was uploaded on 01/06/2012 for the course BUS M 201-1 taught by Professor Jennlarson during the Fall '11 term at BYU.

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Day 13-Ch 6-Part 3 & POW 6-10.17.11 -...

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