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Example 6.2
The inputs for this problem are as follows:
F = $100000; rb = 0.05/2 and; n = 3*2.
Valuing bonds
Coupon bonds
The cash flows of a fixed interest coupon bond
form an annuity plus a single sum when the face
value is repaid.
Fixed interest means that the coupon received on
the bond stays the same over the bond’s life.
The abovementioned cash flow pattern is used in
equation 6.4 to calculate a coupon bond’s value:
Valuing bonds
Coupon bonds
Example 6.4
Example 6.5
The inputs for this problem are as follows:
D1 = $0.35; D2 = $0.37; D3 = $0.42; D4 = $0.45;
P = $65 and; re = 0.11/2.
Valuing ordinary shares
Example 6.7
The inputs for this problem are as follows:
D = $0.15; g = 0.02/2 and; re = 0.06/2.
Valuing ordinary shares