HW2D
Reading 51: Bond Valuation
10/20/2015
1. The fair value of a bond with annual coupon payments of $75.00, a par value of $1,100.00, an
annual discount rate of 10 percent, and ten years to maturity is?
2. You are considering the purchase of a bond with
Test 2 (Chapters 7 and 8) March 10, 2006 FIN 3250 Section 1 MWF 1:10-2:00 Spring 2006
Closed book, notecard allowed Calculator required 50 minutes allowed 100 points total For each multiple choice question, circle the choice that best answers the qu
HW2a
Reading 50: Equity Valuation
10/08/2015
1. Calculate the value of a stock that paid a $1 dividend last year, if next
years dividend will be 5% higher and the stock will sell for $13.45 at
year-end. The required return is 13.2%.
2. A stock recently pa
Bond Valuation
& Investment Decisions
Valuation Fundamentals
Future Cash Flows
Risk
Valuation
The Basic Valuation Model
P0 = Price of asset at time 0 (today)
CFt = Cash flow expected at time t
r = Discount rate (reflecting assets risk)
n = Number of disco
Reading 28
Financial Analysis Techniques
What we want to accomplish today?
Know how to standardize financial statements
for comparison purposes
Know how to compute and interpret important
financial ratios
Be able to develop a financial plan using the
p
FIN 3250-03
Introduction Suman Banerjee
Profile
Ph.D. in Finance, The University of Iowa,
August, 1999.
Taught at Tulane University (until Katrina),
the taught at NTU (Singapore)
2nd year at COB
Corporate Finance
Seminar in Finance Theory
Used to be
Reading 28
Financial Analysis Techniques
Key Concepts and Skills
Understand the information provided by
financial statements
Differentiate between book and market values
Know the difference between average and
marginal tax rates
Know the difference be
The Trade-off between
Risk and Return
Three Basic Steps for Valuing a
Risky Asset
1. Determine the assets expected cash flows.
2. Choose a discount rate that reflects the assets risk.
3. Calculate the present value.
Historical Return and Risk
Decisions mu
TVM Applications
Paying for Your Babys MBA
Just had a baby. You think the baby will take
after you and earn academic scholarships to
attend UWyo to earn his/her Bachelors
degree.
However, you want send your baby to a topnotch 2-year MBA program when bab
Time Value of Money
Suman Banerjee
Fall 2015
Key concepts
Asset
15.401
Lecture 2: Present value
Key question: What is an asset?
Business entity
y
Property, plant, and equipment
Patents, R&D
Stocks, bonds, options
Knowledge reputation opportunities et
1. Consider two companies - Laramie Inc. and Wyoming Co. with the following
assets and liabilities on their balance sheets (figures in millions of dollars). We assume
that both companies operate in the same manufacturing sector, i.e. fishing and hiking
eq
Homework 5
Topic 5
1. What would you expect to pay for a stock with a 17% required rate of return and 6% rate of dividend growth
if the next yearly dividend is $3.50, to be paid one year from today?
2. What would you expect to pay for a stock with a 17% r
Homework 2 Topic 3
Formulas
m = number of periods in a year (for example, if monthly, m = 12).
If you know the APR:
Periodic rate = APR/m
EAR = (1 + (APR/m)m 1
If you know the periodic interest rate:
APR = periodic rate x m
EAR = (1 + periodic rate)m 1
If
Test 1
Sample
Closed book, notecard allowed
Financial calculator required
50 minutes allowed
100 points total
For each multiple choice
question, circle the choice that
best answers the question.
Circle only one answer for
each question
To get credit for
FIN 3250 Exam 2 Review Problems
1. The price today for a bond with annual coupon payments is $1,062.47 and the price in one
year will be $1,053.24. The next coupon, payable in one year, is $60. Find the rate of return on
the bond over the next year.
2. A
Test 1
Sample
Closed book, notecard allowed
Financial calculator required
50 minutes allowed
100 points total
For each multiple choice
question, circle the choice that
best answers the question.
Circle only one answer for
each question
To get credit for
FIN 3250 Exam 1 Review Problems
1. XYZ Corporation has sales of $432,000, costs of $210,000, depreciation expense of $25,000, interest
expense of $8,000, and a 35% tax rate. What is the net income for this firm? What is the operating cash
flow?
2. Find th
Test 2 Key
Closed book, notecard allowed
Financial calculator required
100 points total
For each multiple choice
question, circle the choice that
best answers the question.
Circle only one answer for
each question
To get credit for problems, you
must sho
Test 2
Closed book, notecard allowed
Financial calculator required
100 points total
For each multiple choice
question, circle the choice that
best answers the question.
Circle only one answer for
each question
To get credit for problems, you
must show yo
Homework 4 Topic 4
1. You buy a 30-year bond with annual 5% coupons when the yearly interest rate is 5%, but the rate
immediately rises to 6%. What is the new value of your bond?
2. A bond with 7% annual coupons and 11 years left to maturity has a price o
Homework 3 Topic 3
1. You have a choice between receiving $5,000 per year for fifteen years, with the first
payment one year from today, or $10,000 per year for six years. If the effective annual
interest rate is 5%, which choice has a higher present valu