Lecture 3
Interest Rates and Bond Valuation
3-1
Key Concepts and Skills
Know the important bond features and bond types Understand bond values and why they fluctuate Understand the term structure of
1
FIN 300 Class Notes
Chapter 10: Some Lessons from Capital Market History
Chapter 11: Risk and Return
Dr. Chanwit Phengpis
California State University, Long Beach
2
Rates of Return: A Review
Rate of
Score:
23/23
Points
100
%
1.
Award: 1 out of 1.00 point
Bear Tracks, Inc., has current assets of $2,340, net fixed assets of $11,000, current liabilities of $1,435, and long-term debt of $4,150.
What
FIN300 Comprehensive Review
Module 1.Work with Financial Statements (Chapter 2&3)
1. Which of the following income statement accounts is a non-cash item?
A) Wages and salaries
B) Interest expense
C) C
BLT&E-7e: Practice Quiz
Chapter 3:
The Courts and Alternative Dispute Resolution
1. Before a court may hear a case, it must have jurisdiction:
a. over the person against whom the case is brought or th
A firm has common stock of $115, paid-in surplus of $345, total liabilities of $380, current assets of $370, and fixed assets of $560.
What is the amount of the shareholders' equity? (Chapter 2)
$550
1.
Your portfolio is 310 shares of Sunny Morning, Inc. The stock currently sells for $101 per share. The company has
announced a dividend of $3.20 per share with an ex-dividend date of April 19.
Requi
Score:
1.
24.83/26
Points
95.50
%
Award: 1 out of 1.00 point
First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent
interest compounded
11/20/2017
1.
Assignment Print View
Award: 1.00 point
Suppose a stock had an initial price of $86 per share, paid a dividend of $1.70 per share during the year, and had an
ending share price of $72.50
11/20/2017
1.
Assignment Print View
Award: 1.00 point
What are the portfolio weights for a portfolio that has 200 shares of Stock A that sell for $97 per share
and 175 shares of Stock B that sell for
1
FIN 300 Class Notes
Chapter 4: Introduction to Valuation: The Time Value of Money
Chapter 5: Discounted Cash Flow Valuation
Dr. Chanwit Phengpis
California State University, Long Beach
2
Time Value
11/20/2017
Assignment Print View
Score:
1.
16.65/23
Points
72.39
%
Award: 1 out of 1.00 point
Bear Tracks, Inc., has current assets of $2,200, net fixed assets of $9,600, current liabilities of $1,365
11/20/2017
Assignment Print View
Score:
1.
18/22
Points
81.82
%
Award: 1 out of 1.00 point
SDJ, Inc., has net working capital of $940, current liabilities of $6,700, and inventory of $1,110.
What is t
Score:
1.
20.50/22
93.18
Points
%
Award: 1 out of 1.00 point
SDJ, Inc., has net working capital of $1,810, current liabilities of $5,650, and inventory of $1,275.
What is the current ratio? (Do not ro
1
Chapter 12 HW Keys
1. With the information given, we can find the cost of equity, using the dividend growth
model. Just issued: DIV0.
RE =
DIV 0(1 g )
DIV 1
+g
+ g = [$1.80(1+ 0.06)]/$41 + 0.06 = 0
1
Chapter 8 HW Keys
1. To calculate the payback period, we need to find the time that the project has
recovered its initial investment. After two years, the project has created:
$2,000 + 2,700 = $4,70
1
Chapter 1 HW Keys
1. Capital budgeting (deciding on whether to expand a manufacturing facility), capital
structure (deciding whether to issue new equity and use the proceeds to retire outstanding
de
1
Chapter 6 HW Keys
1. Yes, YTM is the same as the required return.
No, YTM is not the same as the coupon rate. YTM is a required return on the bond and
thus the market rate that investors require on
1
Chapter 10 HW Keys
1. The return of any asset is the increase in price, plus any dividends or cash flows, all
divided by the initial price. The return of this stock is:
Rate of return = [($69 61) +
Score:
1.
29/29
Points
100
%
Award: 1 out of 1.00 point
Uptown Markets is nanced with 45 percent debt and 55 percent equity. This mixture of debt and
equity is referred to as the rm's:
capital structu
1
Chapter 3 HW Keys
35.
Short-term solvency ratios:
Current ratio = Current assets / Current liabilities
Current ratio 2014 = $32,409 / $7,427 = 4.36 times
Quick ratio = (Current assets Inventory) / C
How to solve an optimization problem
Step 1: build a mathematical model
+ define the (unconstraint) variables
X1,X2,X3,X4,X5,X6
+determine the target function
F(X)=
->Max
+determine underlying constra
A discount bond is a bond that sells for less than its face value
A premium bond is a bond that sells for more than its face value.
Present value of perpetuity = C/r
As a borrower, you would want to b
3 major forms in U.S.: Sole Proprietorship,
Partnership,
Cooperation
Fixed claims: loans made by investors to the corporation, EX) bonds, bank loans, wages payable, and fixed coupon payments to bondho
Premium Bond:
Discount Bond:
P(MKT VALUE) > PAR
P < PAR (FACE)
YTM < COUPON RATE
YTM > COUPON RATE
IF YTM= COUP RATE
PAR = BOND PRICE
Par value/face value always equals 1000 if nothing is given. Graph
3 major forms in U.S.: Sole Proprietorship,
Partnership,
Cooperation (goal to maximize wealth of shareholders)
CFFA= Operation CF [Ending WC Beg WC] [Net
Cap Spending]
Opening CF: EBIT + Depreciation