100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Summary Accounting and Fiance 4 - International Busienss $8.10   Add to cart

Summary

Summary Accounting and Fiance 4 - International Busienss

 2 views  0 purchase
  • Course
  • Institution
  • Book

This is all you need in order to pass and understand Finance and Accounting 4 for International Business students studying at HAN University of Applied Sciences. I attached an excel and PDF description of the chapters and relevant exam and practice exercises. It includes, Chapters form Corporate Fi...

[Show more]

Preview 3 out of 22  pages

  • No
  • Chapters 6,7,11,12,16,18,22 ( this is all you need to pass the exam)
  • October 30, 2024
  • 22
  • 2024/2025
  • Summary
avatar-seller
Corporate Finance
CH.6. Bond Valuation
➡️ Key terms

Coupon: $120 interest payment(dinero) stated on a bond.
Coupon rate: Annual coupon/FV is a %.
Face value(FV)/Par Value: The initial amount of a bond that is repaid at the end of the
term. £1,000.
YTM: The interest rate required in the market on a bond
PMT = payment per period. The formula is = FV * CR
nper = Number of Periods (it's just time e.g. 9 years ).

HOW TO WORK OUT BOND VALUATION:
How to find Current Price:
In Finance, to know the Current price of a bond, you can follow this financial method in excel:




Price = price%, then you must convert it to money.

,How to find YTM:




How to find CR:




‼️How to find YTM with many unknowns:
Given Information:

Coupon Rate = 7.5% annually
Par Value = 100% (Assumed to be $1,000 for simplicity)
Current Price = 105% of Par = 105% * $1,000 = $1,050
Time Remaining to Maturity = 8 years (since the bond was issued 2 years ago for a 10-
year term)
Coupon Payment Frequency = Semi-Annual (2 times per year)
Step-by-Step Solution:

1. Calculate the Semi-Annual Coupon Payment:
The bond pays 7.5% annually in coupon payments, which means the semi-annual coupon
payment is:
Semi-Annual Coupon Payment=(Coupon Rate × Par Value​)/2=(7.5%×1,000​)/2=$37.50
2. Enter the Known Values in Excel:
N (Total number of periods) = 8 years×2=16 semi-annual periods8 \text{ years} \times
2 = 16 \text{ semi-annual periods}8 years×2=16 semi-annual periods
PMT (Coupon payment) = $37.50
PV (Present value or current price of bond) = $1,050 (input as negative in Excel for
present value)

, FV (Future value or par value at maturity) = $1,000
Rate (YTM) = This is the unknown value we will calculate using Excel.
3. Use the Excel RATE Function:
The formula to calculate the YTM in Excel is:
=RATE(N, PMT, -PV, FV)
N = 16 (semi-annual periods)
PMT = 37.50
PV = -1,050 (negative because it's the purchase price)
FV = 1,000
👀When you input this formula into Excel, you will get the semi-annual yield.
Multiplying by 2 will give the annual YTM.
=RATE(16, 37.50, -1050, 1000) * 2




Interest Rate Risk.
(exercise 18. also, page 271)
The risk that arises for bond owners from fluctuating interest rates is called interest rate risk.
How much interest rate risk a bond has depends on how sensitive its price is to interest rate
changes.
This sensitivity depends directly on two things: the time to maturity and the coupon rate.

1. All other things being equal, the longer the time to maturity, the greater the interest
rate risk.
2. All other things being equal, the lower the coupon rate, the greater the interest rate
risk.

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller carlalpez. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $8.10. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

64438 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$8.10
  • (0)
  Add to cart