A simple and understandable summary of basic Corporate Finance theories and principles.
Financial markets
- A comprehensive overview of the two key financial instruments: Stocks and Bonds
- Understand how these instruments are issued, priced and traded
The risk-return trade-off and the pricing of...
Corporate finance final document
Monday, 19 December 2016 14:10
Financial markets
• Give an overview of the two key financial instruments: Stocks and Bonds
• Understand how these instruments are issued, priced and traded
The risk-return trade-off and the pricing of market risk
• Introduce the concepts of risk and return in financial markets and how
diversification influences risk and return
• Show how return is related to risk through the Capital Asset Pricing Model
Corporate finance
• Extend understanding on company valuation and investment appraisal
• Introduce the concept of the cost of capital and how it can be calculated.
• Understand how extreme events can affect the cost of capital
• Show how companies are financed and how to decide between different types of
finance.
Finance in practise
• Most lectures will include a discussion/case study to illustrate how the lecture
material is relevant to current financial trends and issues
Materials:
- Pre lecture materials
- Summary for each lecture
- Self study questions
- Case studies
• Lecture 1: Introduction to Finance (not examinable)
• Introduction to Finance, Financial Markets and Corporate Finance
,
,- Self study questions
- Case studies
• Lecture 1: Introduction to Finance (not examinable)
• Introduction to Finance, Financial Markets and Corporate Finance
Lecture 2: Bond Markets
Pricing bonds, Government & corporate bond markets, Green Bonds
Bond terminology:
- Bond indenture = legal contract stating terms of the bond
- Bond Covenants = additional requirements or conditions on the borrowing as
written in the indenture
- Face Value = Notional amount used to compute the interest payments
- Maturity date = Final repayment date
- Term = The time remaining until the repayment date
- Coupon Rate = Determines the amount of each coupon pay
- ment, expressed as an APR
- Coupon payment
○
- Yield to maturity (YTM) = the discount rate that sets the present value of
the promised bond payments equal to the current market price of the bond
○ The single discount rate that equates the present value of the bond
remaining cash flows to its current price
- Dirty price = bond price reffering to the price of a coupon bond that includes
the PV of all future cash flows, including interest accruing on the next
coupon payment.
- Clean price = Price of bond without accounting for accrued interest
Zero Coupon Bond
- No coupon payments
- If price < face value = sells at a discount. Called "pure discount bonds"
- T-bills are US govnerment zero-coupon bonds with a maturity of up to one
year. These Sovereign Bonds have no risk of default, and can be used for
risk free rate.
- Yield to maturity equals the rate of return, expressed as a function of the
price:
○
Coupon Bonds
- Sovereign Bonds
○ Coupon bonds pay face value at maturity with regular coupon interest
payments
○ Treasury Notes (Gilts in the UK) have coupon security with original
,
The benefits of buying summaries with Stuvia:
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
You can quickly pay through credit card for the summaries. There is no membership needed.
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 josefinerding. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £4.78. You're not tied to anything after your purchase.
