Bond Street

INTRODUCTION Investment instrument is a document such as bond and share certificate that has monetary value through agreement that agrees make payment of money to another parties for purpose gain equity capital or loan capital. An investment instrument give a promise of earnings and return to the holders or recipient. It also called as financing instruments. There are three common types of investment instruments in the market which are money markets, bonds and common shares. Money market is the short-term

stated above. Chapter 20 Question A2 Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year life. (2) A $50 million private placement with a large pension fund. Issuance costs are $500,000, the bond has a 9.25% annual coupon, and the bond has a 20-year life. Which alternative has the lower cost (annual percentage yield)? According to the following calculations:

Matlab to get an intuitive understanding of bonds valuation. 1. Basic knowledge: 1.1 The price equation and its six contributing factors As we know, there are six factors that determine the expected price of bonds: the par value(F), the maturity(n) the yield to maturity(y), the coupon interest(CF), the interest payment frequency(m), and the interest rates for each period(ri). We assume that the coupon interest is fixed, then the price of bonds(P)is the discounted cash flows of each period:

market instruments include: debentures, bonds, stocks, fixed deposits, T-bills, foreign exchange and many others. The aforementioned capital market instruments are responsible for producing funds for firms and sometimes national governments. Two basic capital market instruments are stocks and bonds. Stocks are used in three different markets as the capital market instrument: the virtual, the physical, and auction markets. Bonds are traded in a separate bond market, also known as a credit, debt or

price equation for the bond. In addition to solving the problem, write a 100 to 200 word essay on the term structure of fixed income securities. One method used to obtain an estimate of the term structure of interest rates is called bootstrapping. Suppose you have a one-year zero coupon bond with a rate of r1 and a two-year bond with an annual coupon payment of C. To bootstrap the two-year rate, you can set up the following equation for the price (P) of the coupon bond: /(1+r_1 )+(C_2+Par value)/(1+r_2

The future value of an investment will increase when 
 | | |the number of years increases. | | | |the interest rate increases. | | | |both a and b. | | | |none of above. | Question 2 When the

her seminar on risk and return, any customers where clamoring for a second lecture. Therefore, Jake Taylor, Peachtree’s president, gave Donahue her second task: determine the value of TECO Energy’s securities (common stock, preferred stock, and bonds) and prepare a seminar to explain the valuation process to the firm’s customers. To begin, Donahue reviewed the Value Line Investment Survey data. Next Donahue examined Teco’s latest Annual Report, especially Note E to the Consolidated Financial

------------------------------------------------- CHAP 19 When a company issues securities to the general public, it usually uses the services of an investment banker who underwrites (purchases at a fixed price on a fixed date) new securities for resale. For this service, investment bankers receive the difference, or underwriting spread, between the price they pay for the security and the price at which the security is resold to the public. There are three primary means by which companies

Chapter 7 Test Review Problem 7-1 Bond valuation Callaghan Motors' bonds have 5 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 6.5%, and the yield to maturity is 11%. What is the bond's current market price? Round your answer to the nearest cent. Annual Interest Payment = Par Value * Coupon Rate $1,000 * 6.5%= 65 Financial Calculator N= 5 I/YR= 11% PMT= -65 FV= -$1,000 Find PV? Bond’s Current Market Price= 833.68 Problem7-2

τd is the tax rate for income from dividends τe is the tax rate on equity income: τe = (dividend payout ratio)(τdiv) + (1 – dividend payout ratio)(τcg) τcg is the tax rate on capital gains τdiv is the tax rate for income dividends Bond default probabilities: Bond Rating P(default) AAA 0.00% AA 0.47% A 0.14% BBB 0.18% BB 0.37% B 2.42% CCC 7.20% 6. UST Inc. has paid uninterrupted dividends since 1912. Will a recapitalization (issuing debt and buying back equity with the proceeds) hamper future