Valuation of Bonds and Shares
Prepared byPriyanka Gohil
Valuation
Valuation is the process of linking riskwith returns to determine the worth ofan asset.The value of an asset depends on thecash flow it is expected to provide overthe holding period.A security can be evaluated by theseries of dividends or interest paymentsreceivable over a period of time.
BASIC VALUATION MODEL
Basic valuation model is defined as the value of anasset in terms of the present value of its expectedfuture cash flows discounted at an appropriate rateof return.The investor·s expected minimum rate of return istaken as the appropriate discount rate at theinvestment·s level of risk.
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