Exercise 2 (it's only one question) You are a financial analyst, and you are presented with these characteristics of financial stocks, which one would you recommend to buy or not to buy? And for what reason ? (explain briefly) * The OBL obligation - Maturity: 16 years - Face value: $1,000 - The coupon rate: 6% - Market price: $874 - The yield demanded by investors for a comparable bond is 8% nominal capitalized semi-annually. * ACOR ordinary share: - Market price: $45 - Annual dividends: D1=2; D2=1.5; D3=1.8; D4=2; D5=2.5 after the D5 the dividends will have a growth rate equal to the historical average of the dividends, up to infinity. - The rate demanded by investors for a comparable ordinary share is 10% nominal per annum. * The ACPR preferred share: - Market price: $15 - Semi-annual dividends: $0.5 - The rate demanded by investors for a comparable preferred share is 6% nominal compounded semi-annually.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Exercise 2 (it's only one question)
You are a financial analyst, and you are presented with these characteristics of financial stocks, which one would you recommend to buy or not to buy? And for what reason ? (explain briefly)
* The OBL obligation
- Maturity: 16 years
- Face value: $1,000
- The coupon rate: 6%
- Market price: $874
- The yield demanded by investors for a comparable bond is 8% nominal capitalized semi-annually.
* ACOR ordinary share:
- Market price: $45
- Annual dividends: D1=2; D2=1.5; D3=1.8; D4=2; D5=2.5 after the D5 the dividends will have a growth rate equal to the historical average of the dividends, up to infinity.
- The rate demanded by investors for a comparable ordinary share is 10% nominal per annum.
* The ACPR
- Market price: $15
- Semi-annual dividends: $0.5
- The rate demanded by investors for a comparable preferred share is 6% nominal compounded semi-annually.
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