Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
To value an option-free bond, we must determine the on-the-run yield curve for the particular issuer whose bond we have to value. This on-the-run yield curve used for valuation process is considered as the benchmark interest rates.
Let us consider the following on-the-run issue. The illustration deals with an option-free bond with four years remaining to maturity and a coupon rate of 6.5%.
Maturity
Yield to Maturity (%)
Market Price (in $)
1 year
3.4
100
2 years
3.9
3 years
4.7
4 years
5.0
Each bond is trading at par value i.e., at $100, so the coupon rate is equal to the yield to maturity.
Using the bootstrapping method, the spot rates are determined as follows:
Years
Spot Rates (%)
1
3.3000
2
3.9098
3
4.8120
4
5.0586
Using spot rates, we can calculate the present value of the cash flows.
= $105.374
Illustration Let us assume that Vishal Mehta & Co., (from Illustration 1) is using the following discounting rates in place of one rate:
Determine the Valuing Equity Securities Unlike debt and money market instruments, equity instruments represent ownership interest in the company. As owners should put in their
What is the Trade payable days (turnover) Year-end trade payables/Credit purchases (or cost of sales)x 365days This is the length of time taken to pay suppliers. The rat
Accounting System: The accounting systems are the primary financial systems that any business should have in place to ensure accurate and usable financial information. The b
Goodshape Company has currently, an ordinary share capital of Rs. 2.5 million, consisting of 25,000 shares of Rs. 100 each. The management is planning to raise another Rs. 2 milli
Calculate the firm’s WACC. Prepare and analyze each planned capital expenditure. Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organiz
Determine the factors of auditors When anticipating to apply analytical review as a substantive procedure, auditors determine a number of factors like: Factor
A U.S. company holds an asset in France and faces the subsequent scenario: State 1 State 2 State 3 State 4
Ashok is to receive an amount of Rs. 15,00,000 from his relative after 3 years. He wants to buy a house for which he wants the money to be paid now. His relative had al
Q. Merits of Wealth Maximization Approach? Merits of Wealth Maximization Approach:- The wealth maximization schema is superior to the profit maximization approach because:
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd