How do you calculate – Price of a semi-annual coupon-paying bond? Price of an annual zero-coupon bond? Yield-to-maturity of an annual zero-coupon bond
FIN 300 – Exam 2 –
• Bonds – Ch. 8 o Quantitative problems –
- How do you calculate –
- Price of a semi-annual coupon-paying bond?
- Price of an annual zero-coupon bond?
- Yield-to-maturity of an annual zero-coupon bond
- Qualitative and conceptual issues to know –
- What is the relationship of price vs. yield
- What is the relationship of price volatility (when interest rates change) to the maturity of a bond
- Are longer or shorter maturity bonds more or less volatile?
- What happens to the price of a bond as the bond matures?
Inflation – small portion of Ch. 2 Quantitative problems –
Given two of the variables – how do you solve for the missing one?
• Stocks – Ch. 9
- What is the constant growth equation?
- When do you use it, and what are some variations you may see in problems that require it?
• Explain these concepts
- R = total return = dividend yield + capital gains yield
- Dividend yield = ending dividend(DIV1)/Beginning Price(P0)
- g = dividend growth rate = price growth rate = capital gains yield
- Preferred shares of stock
How would you solve for either the price, rate of return (discount rate), or dividend for the following 2 scenarios?
– Annual dividends
– Quarterly dividends
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