STOCK AND BOND VALUATION/CALCULATION

How to Value Bonds and Stocks

Bond- fixed income investment instrument – return is known.

Stocks – hisse senedi- return is unknown. Stock prices depend on future dividends and dividend.

STOCKS -tahvil future cash flow is dividend.

BOND -tahvil future cash flow is the coupon payment.

İs legally binding agreement btw a borrower and a lender that specifies:

 PAR VALUE –
 COUPON RATE
 COUPON PAYMENT
 MATURITY DATE

The yeild to maturity is the required market interest rate on the bond.

Pure Discount Bonds - generally issued by government

Make no periodic interest payments (coupon rate =0%)

Cannot sell for more than par value.

Treasury Bills and principal only Treasury

Niye 0 kupon tahvil alırız?

Ancak dolara yatırım yapıyorsun demektir.

PV=FV/(1+R)T

Level Coupon Bonds

U.S

0.375 =6+ 3/8 - >0.06375

C=PAYMENT=31.875

TERM=2010-2006 =4

SEMI-ANNUALLY =8 Periods

Sensitivity: Public
 1000*0.06375=63.75

YİELD= %5

Consols
Not all bonds have a final maturity.
Bnd prices and market interest rates move in opposite directions.
Coupon rate=ytm, price=par value
Coupon rate>ytm, price>par value
Coupon rate<ytm, price<par value
**** COMPUTING YIELD TO MATURITY- EXAM QUESTION
10% ANNUAL COUPON RATE
15 YEARS MATURITY
PAR VALUE=1000
Current Price=928.09
5.3 ‘ün sonu önemli değildir.
Par value> Current price
Year to maturity> coupon rate. Higher than 10 percent

ZERO GROWTH = Div/R = P

CONSTANT GROWTH= DİV/R-G
Differential growth = exam – final question
5.7 sorumlu değiliz.
5.8 Price Earnings RATIO

8.16 İLE 9.13 -> SINIFTA ÇÖZÜLEN SORULAR

Sensitivity: Public
Sensitivity: Public
Sensitivity: Public