StudentShare solutions

# Bonds mod 2 case - Essay Example

## Extract of sample Bonds mod 2 case

5.35%
1.125381

Bond 3 has the highest percentage change and bond 1 has the lowest percentage change.
Table 3: Price for the four bonds (after increase of 0.5% in yield to maturity) and the percentage change from base case
Bond number
Maturity (years)
Coupon (\$)
Price (\$)
Yield to maturity (%)
Change from original (%)
1
2
50
974.1183
6.42%
-1.8026
2
3
45
958.3473
6.06%
-1.34675
3
4
60
994.5793
6.16%
-1.72141
4
6
55
958.6585
6.35%
-3.77975

Bond 4 has the highest percentage change and bond 2 has the lowest percentage change.
From the results, it can be inferred that under normal circumstances and for normal bonds, the yield increases as the maturity period increases, so, if an investor is holding the bond for longer time, then, he/she will have greater yield as compared to an investor who holds the bond for shorter period.
There are various corporate bonds, wherein, the companies raise funds by issuing bonds and make the interest payments to the bond holders. However, in case of corporate bonds, there is a probability of default, if the company defaults, the bond-holder will not be able to generate returns on the bonds. Any investor who wishes to invest in bonds should consider the probability of default. All the above calculations are done on the basis of the assumption that there is no risk of default.
Dividend Growth Model
The three factors which affect the stock prices in case of dividend growth model are as follows.
The current dividend
Growth of the dividend
Required rate of return
The formula which relates the above mentioned parameters with the value of the stock is as follows. (Dividend Growth Model)
Value = (Current Dividend * (1 + Dividend Growth)) / (Required Return - Dividend Growth)
Some of the inferences from this formula are as follows.
The value of...
There are various corporate bonds, wherein, the companies raise funds by issuing bonds and make the interest payments to the bond holders. However, in case of corporate bonds, there is a probability of default, if the company defaults, the bond-holder will not be able to generate returns on the bonds. Any investor who wishes to invest in bonds should consider the probability of default. All the above calculations are done on the basis of the assumption that there is no risk of default.
The value of stock increases with dividend growth if the dividend growth is less than 50% and it decreases of dividend growth is more than 50%. (Calculated by differentiating the equation with respect to dividend growth) ...Show more

## Summary

According to literature, the yield curve is generally upward sloping, higher the maturity, greater will be the yield. However, in some of the cases, abnormal behavior is also expected. For example, in cases when the long term yields are less than the short term yields, we get an inverted yield curve…
Author : markswilbert
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Bonds mod 2 case"
with a personal 20% discount.
Grab the best paper

### Check these samples - they also fit your topic

ECO 202 MOD 3 CA
Q2. The link below takes you to a site that shows you various Treasure security yields and how short and long-term yields differ. This is called the term structure of interest rates and when graphed it is called a yield curve. What is the relationship between short and long-term interest rates as the time to maturity of the debt increases?
4 pages (1000 words) Essay
LOG501 Forcasting EESC MOD 2 Case Assign
Risk and uncertainty form the central aspects of forecasting and prediction (American Production and Inventory Control Society, 2004). The management team of EBBD led by Wilco requires a deeper analysis and consideration to be done in bid of establishing the extent of utilization of forecasting methods at EBBD.
3 pages (750 words) Essay
ITM501 MoD 2 Case Assign
The clinic handles around 375000 patients every year. The management team of the clinic decided to create a paperless work environment and the staffs were provided with tablets to keep track of the various information about the patient. However the management team found that only gathering the patient data is not serving the purpose of efficiently running the business.
5 pages (1250 words) Essay
ITM501 MoD 2 Case SLP
A project is, however, defined as a venture that has to be completed in a predefined time period with an approval of the sponsor (Koskela & Howell, 2002). The project management is rated high on the scale of riskiness because it is meant to bring something new and test its applicability in a limited scope.
3 pages (750 words) Essay
MPH599 - Culminating Project Mod 2 Case Assignment
numbers of type II diabetics and children corresponds with the increasing prevalence of obesity in children and adolescents(Strayer, Pravikoff, 2009). This is true in children and adults as well as adolescents today . The United States is number one on the list for the number of
3 pages (750 words) Essay
ECO 202 MOD 3 CA
This is called the term structure of interest rates and when graphed it is called a yield curve. What is the relationship between short and long-term interest rates as the
4 pages (1000 words) Essay
MGT506 - Strategic Leadership, Mod 2 Case Assignment
The business was successful to such an extent that it was included as the number one business management company by CNN Money. The company right now has more than 5000 employees within the US and contributed
5 pages (1250 words) Essay
Mod 2 case Tort Law
e party acting negligently had a duty of care, and that such duty was breached by the negligent party resulting in injury to the other party (Ashley, 2004). In respect to negligence in Bobby’s case, it is evident that ACE sports acted negligently by leaving small pieces of
2 pages (500 words) Essay
LOG502 MoD 2 Case Assign Distribution Systems
Supporting institutions which provide support services, components and raw materials which then come together for the purposes of developing joint solutions and the combination of resources in
4 pages (1000 words) Essay
BUS699 MoD 2 Case
This analysis helps the organization identify its structure, subsystems and processes which helps to know the strengths and weaknesses leading to performance evaluation of the organization. This performance evaluation will help the
6 pages (1500 words) Essay
Hire a pro to write