FIN 380 Lesson 4: Chap. 5
REVIEW
1. TVM
Why does money have time value? Is interest rate always positive?
2. Simple Interest (no interest on interest)
FVsimple = PV * (1 + rt)
Compound Interest (interest on interest)
FVcompound = PV * (1 + r)t
If t>1, the
FIN 380 Lesson 6
REVIEW
1. Effective Annual Rates:
m
r
EAR 1 1
m
r
FV PV 1
m
mt
PV (1 EAR )t
where m is the number of times per year interest is compounded, and r is the nominal interest rate,
or APR.
m
2.
APR
EAR 1
1
m
3. Continuous Compounding
EA
If Statements
IF
Value
And
Income
Income threshold
Pay taxes
Income Tax Calculation
Income (taxable)
Untaxed Income
Tax Rate
Tax Due
Income (taxable)
Lower Income-bracket 2
Lower income-bracket 3
Tax rate-2
Tax rate-3
Tax due
Income tax tables
Income (tax
Feng 1
The introduction of the book gives more of a theoretical frame of the book than a
short overview of the book. In the introduction, the author introduces the idea of reaching a
conclusion without the use of tools and analysis; only using previous ex
Feng 1
Yangyang Feng
Professor Michael Neugent
FIN 4041
06 September 2016
Blink Book report
Blink was at the top of the US best-seller list in 2005. The first thing to consider is
the word in the title, blink, which is to shut and open the eye in an insta
Feng 1
Yangyang Feng
Professor Michael Neugent
FIN 4041
09 October 2016
Stock Analysis: Southwest Airlines
Executive Summary
The paper discusses the assumptions used to create the DCF model in order to ascertain
the intrinsic stock price of SouthWest Airl
Blink: The Power of
Thinking Without Thinking
2
Blink: The Power of
Thinking Without Thinking
Blink: The Power of Thinking Without Thinking
By Gladwell, Malcolm
Introduction The Statue That Didnt Look Right
In September of 1983, an art dealer by t
HW 3
1. What are the main differences between corporate bonds and US Treasury bonds? (5 points)
Answer: Corporate bonds have default risk because issuers have limited liability; have
contractual provisions; and are not as liquid as Treasure bonds.
2. What
FIN4014 fall 2016
Quiz One August 26, 2016
Name:
Student ID:
Assume semiannual compounding and semiannual
coupon payments.
(a) The par value of a five-year Treasury bond is
$1,000, and the annual coupon rate is 10%. The
annual yield is 8%. Calculate the p
FIN4014 fall 2016
Quiz 3
Bond A is a 1-year zero coupon bond with a par of
$1,000. Bond B is a 1-year 10% coupon bond with a par
of $1,000. The current yield to maturity is 10%.
a) Calculate the Macaulay duration and the modified
duration for bonds A and
FIN4014 Fixed Income
Fall 2016
Instructor: Hui Guo
8/21/2016
1
Prof. Hui Guo
Worked as an economist at Federal Reserve Bank in St. Louis for 7 years
Federal Reserve System is the US central bank
Federal Reserve Board and 12 regional banks: monetary poli
FIN4014 Fixed Income
Instructor: Hui Guo
8/21/2016
Hui Guo FIN4014 Fixed Income
1
Pricing of Bonds
8/21/2016
Fixed Income Hui Guo
2
Time Value of Money
Future value of $P0 invested at an interest rate r per period
8/21/2016
Period
Future Values
0
P0
1
P1=
Stock Portfolio
Feel free to ask any questions you need to accomplish the task-I am the client.
Portfolio should be able to accommodate at least 30 holdings.
The portfolio is actively traded but overall utilizes a buy and hold strategy.
The monthly cash f
Preliminary steps to Project 1-Southwest-Due September 29th
1. Get to know your company. Scan the companys 10K, most recent 10Q and annual
report. Your goal at this point is not to read the documents in-depth. Rather to get a feel
for the company. Since t
RNOA and NOPAT
NOPAT calculation
You are calculating net operating profit after taxes.
1. Start with operating income.
2. Subtract the taxes listed on the income statement from step 1. May be called provision for
income taxes.
3. Next calculate the tax sh
Present Value Problem
CF
Discount Rate
Periods
$5,000,000.00
11%
5
PV
$2,967,256.64
Net Present Value Problem
initial investment
First Yr CF
Second Yr CF
Third Yr CF
Fourth Yr CF
Fifth Yr CF
Discount Rate
Net Present Value
Amount
Period
$(15,000,000.00)
$
Project Example Information
You are reviewing a new project and have
estimated the following cash flows:
CF0 = -165,000
Year 1:
CF1 = 63,120
Year 2:
CF2 = 70,800
Year 0:
Year 3:
CF3 = 91,080
Your required return for assets of this risk level is
R=12%.
Com
1.
Review Notes for Test 1
What is the controller of a corporation?
2.
What is a capital budgeting decision?
3.
What is a limited partner?
4.
What are some ways to resolve the agency problem?
5.
What is a proxy?
6.
What is a primary market transaction?
7.
Review Notes for Test 2
1.
What is cumulative voting?
- A procedure in which a shareholder may cast all votes for one member of the board of directors.
The effect is to permit minority participation.
2.
What is a commission broker?
- NYSE members who exec
Loose ends for Project 1.
1. Capital structure:
a. You want to keep the ratio of equity to debt constant in your forecasted years. When
calculating retained earnings make sure that you use the formula: last years retained
earning plus this years net incom
Fin 4041 First Project
Due date: 10/11/2016
What: submit a three page buy/sell recommend regarding Southwest Airlines. This report is to
be supported by a valuation of the firm (DCF model and company forecasts)
Specifics of report: Submit a three page rep
Revenue
Cost of Goods Sold
Gross Margin
R&D
Depreciation
Operating Expenses
Other Expenses
Operating Income
Interest Expense
Interest Income
Income before taxes
Income tax expense
Net Income
Value
Rua
WACC
Equity
WT
Debt
WT
Ter
Rf
2013
$5,250,125
$3,307,5