1. An IPO is the first time a formerly privately-owned company sells stock to the general
public. A seasoned issue is the issuance of stock by a company that has already undergone an
IPO.
3. The primary market is the market where newly-issued securities a
BKM, CHAPTER FIVE
1. The 1% VaR will be less than 30%. As percentile or probability of a return declines so
does the magnitude of that return. Thus, a 1 percentile probability will produce a
smaller VaR than a 5 percentile probability.
2. The geometric re
BKM, CHAPTER SIX
1.
So long as the correlation coefficient is below 1.0, the portfolio will benefit from
diversification because returns on component securities will not move in perfect lockstep. The
portfolio standard deviation will be less than a weight
1. Duration can be thought of as a weighted average of the maturities of the cash flows
paid to holders of the perpetuity, where the weight for each cash flow is equal to the
present value of that cash flow divided by the total present value of all cash f
1.
Catastrophe bond: Typically issued by an insurance company. They are similar to an
insurance policy in that the investor receives coupons and par value, but takes a loss in part
or all of the principal if a major insurance claim is filed against the is
1. Mutual funds offer many benefits. Some of those benefits include: the ability to invest
with small amounts of money, diversification, professional management, low transaction
costs, tax benefits, and the ability to reduce administrative functions. The
2. While the DJIA has 30 large corporations in the index, it does not represent the overall
market nearly as well as the more than 5000 stocks contained in The Wilshire index. The
DJIA is simply too small.
4. The major components of the money market are T
1. The required rate of return on a stock is related to the required rate of return on the stock
market via beta. Assuming the beta of Google remains constant, the increase in the risk of
the market will increase the required rate of return on the market,
Chapter 10
Some Lessons from
Capital Market History
NPV Rule Rules!
To do NPV, you need to estimate a
discount rate
Risk and Return
Efficient Markets
Use
Cost of Equity to value stock
Cost of Debt to value debt
Cost of Capital to value projects
Whe
Michala Schramm
Extra Credit
FINA 362
Stephen Wilcox conducted a critic paper on Robert Shiller CAPE and the outlook for Future US Equity
Returns. Mr. Wilcox has been a long term fan of Robert Shriller and highly respects him, though he feels
that the use
Chapter 9
Finance 362
Focus on Cash Flows
Cash Flows rather than Accounting Flows
Marginal Cash Flows Only
Overhead Costs follow the marginal rule
Opportunity Costs: The cost of the next best alternative
Sunk Costs are Unrecoverable: Like the Titanic
Dive
Chapter 8
Alternate Investment Rules
and
NPV
Introduction
For these chapters we will look through the
various methods of valuation to show the benefits
and flaws of each. We will also discuss the relative
frequency of use of each method
Outline
1. Describ
Chapter 7
Equity
4/11/16
1
Introduction
In this chapter we will introduce equity
securities. We will discuss what they are,
why they exist, and many of the
characteristics of equity securities and
markets
4/11/16
2
Outline
1. Explain preferred stock and
Consider the following cash flows:
Year
0
1
2
3
4
Cash Flow
$5,900
2,000
2,700
1,500
900
Required:
What is the payback period for the above set of cash flows? (Do not round intermediate
calculations.Round your answer to 2 decimal places (e.g., 32.16).)
Pa
Extra Credit
Womens Empowerment
Michala Schramm
The Womens Empowerment Event had a panel of six speakers: Jena Thompson Daisy Blue Naturals,
Christina Frachlich Bank Vista, Melissa Kreyser American Family Insurance, Barb Dorn YWCA
Mankato, Jenn Kelley Cof
Initial
Revenues:
Sales
Depreciation Sold
Assets:
Cash
A/R
Inventory
Extruder (Machine)
Liabilities and Equity:
A/P
Canabalized
Maintence
Opportunity Cost
Overhead
Preparing Building
Training
By Group 8:
Michala
Shaela
Caleb
Josh H
TJ
Mizan
Yr 3
Yr 4
Yr 5
Chapter 6
Interest Rates and Bond Valuation
Chapter Structure
Calculate Bond Value
Describe the Characteristics of Bonds
Discuss Bond Quotes and the Bond Market
See Different Types of Bonds
Cover the Effects of Inflation on Bond
Yields
Different Corporate
Chapters 4
Discounted Cash Flow
Valuation
Chapter Structure
Calculate Present Value
One Cash Flow
Annuity
Calculate Future Value
One Cash Flow
Annuity
Calculate other factors
Payment
Time
Interest Rate
Run a loan amortization schedule
Identify and convert
Financial Analysis
Financial Statements, Taxes and
Cash Flows
Core Financial Statements
Balance Sheet
Income Statement
Statement of Cash Flows
Uses and allocations of cash
Financing, Investing, and Operating
Balance Sheet
Snapshot of assets and liabilit
Chapters 5
Discounted Cash Flow Valuation
Forms of Annuity
Ordinary Annuity:
An annuity with cash flows beginning one
period from today
Annuity Due:
An annuity with cash flows that start
immediately. There is a logical flag to
activate this
Deferred
Chapter 1:
Financial topics
Corporate finance
Investments
Financial institutions
Internal finance
Investments
Stockbrokers often work for large companies advising customers on what types of investments
to consider and helping them make buy and sell d
Present Value
Future Value
$0.00
$2,817.40
PV
2500
FV
PMT
0
RATE
0.80%
TIME (yrx12m)
15
PV Annuity Due FV Annuity Due
$0.00
2839.9357999352
Time Value
Rate Value
Payment Value (month)
#NUM!
-93.50%
$167.56
(NPV) Period
(NPV) CF
Rate
0
300000
10.00%
1
3000
Chapter 3
Working with Financial Statements
Common-Size Statements
Redo financial statements with percentages instead of
absolute numbers
1) Useful for comparison over time
2) This allows you to see problems hidden by company growth
or strengths in a shri
Chapter 6:
App Store Co. issued 20-year bonds one year ago at a coupon rate of 6.1 percent. The bonds make
semiannual payments.
Required:
If the YTM on these bonds is 5.3 percent, what is the current bond price? (Do not round intermediate
calculations. Ro
CHAPTER 5
Net Present Value and
Other Investment Criteria
Topics Covered
A Review of The Basics [Net Present Value
(NPV)]
The Payback Period
Internal Rate of Return
Choosing Capital Investments When Resources
Are Limited
2
Net Present Value (NPV)
NPV
CHAPTER 6
Making Investment Decisions
with the Net Present Value
Rule
Topics Covered
Applying the Net Present Value Rule
IM&Cs Fertilizer Project
Investment Timing
Equivalent Annual Cash Flows
2
n
Ct
C1
C2
Cn
NPV
C0
.
t
2
(1r )
1r (1r )
( 1 r )n
t 0
W