Chapter 6: How to Value Bonds and Stocks
6.1 The price of a pure discount (zero coupon) bond is the present value of the par. Remember, even though
there are no coupon payments, the periods are semiannual to stay consistent with coupon bond payments.
So,
Week 1
Review: Time Value of Money
Valuation of stocks and bonds
Agenda
Time value of money - review
Bonds
Price: Zeros, Coupon, Consol
YTM
Holding period return
Stocks and the dividend discount model
D / r, D / ( r-g), Two stage growth
g = ROE * re
Chapter 5: The Time Value of Money
5.1 The simple interest per year is:
$5,000 0.09 = $450
So, after 10 years, you will have:
$450 10 = $4,500 in interest.
The total balance will be $5,000 + 4,500 = $9,500
With compound interest, we use the future value f
Question 1
5 out of 5 points
Assume a firm with 5,000 shares outstanding earns $10 per share and has
a 30% plowback ratio. These earnings will cause retained earnings to:
Correct
Answer:
increase by
$15,000.
Question 2
5 out of 5 points
Which one of the f
8.Corporationsthatannuallyretireasetportionoftheirlongtermdebtaresaidtobeusing
indexed
bonds.
sinking
funds.
convertible
debt.
secured
debt.
1. Assume a firm with 5,000 shares outstanding earns $10 per share and has a 30%
plowback ratio. These earnings wi