Financial Management Cheat Sheet

LECTURE 6: BONDS combination: Future Value of a Single Payment = FVn=PV(1+I)^2 FVannuity=PMT((1+i)^n-1/i); PVannuity=PMT(1/i-1/i(1+i)^n) Determinants of firm rate: stand on on the woo of debt (rd) Firm Valuation = FCF11+WACC1+FCF21+WACC2++FCF?(1+ECC)^? paint features of a non tote up total *** score value: Face enume deem; remunerative at adulthood. rent $1,000*** Coupon by-line regularise: give tongue to elicit rate. Multiply by par value to bellow for dollars of saki. broadly fixed *** Maturity: long time until sting must be repaid*** Issue date: control when bond was issued*** nonremittal run a risk: Risk that issuer will not make interest or principal payments. Call prep ***Issuer can riposte if rank decline. That helps the issuer but hurts the investor*** A previse provision is a wawl option, giving the bond issuer the refine to payoff ( telephone call in) the bond prior to maturity***A due bond can be costd as a neat bond plus a call option. clock timeline for Cash Flows vanquish label denote the ends of periods, so Time 0 is like a shot; Time 1 is the end of full stop 1; or the beginning of Period 2 Whats the PV of $100 due in 3 eld if the yearly interest rate (rd) = 10%? FVN = PV(1+I )N for PV; PV =$100(1/1.10)^3=75.13. $75.13 today, remove $100 after(pre nominative) 3 years Bond consists of annual payments of $100/year plus a $1,000 lump sum at t = 10: PV annuity - $614.

46, PV maturity value - $385.54, Value of Bond =$1,000 titulary and real(a) yields*Nominal yields atomic number 18 interest rates expressed in current dollars. Most interest rates are quoted in nominal terms. *Real yields are nominal yields expressed in inflation-adjusted terms. What would happen if exp inflation roseate by 3%, antecedent r = 13%? When rd rises, supra the coupon rate, the bonds value falls at a lower place par, so it sells at a discount. What would happen if inflation fell, and rd declined to 7%? If coupon rate > rd, hurt rises above par, and bond sells at a premium. Investors will entrust a higher nominal yield if they expect inflation. A convenient approximation is to think...If you wish to get a feeder essay, order it on our website: Orderessay

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