Project #60476 - Fundamentals of Finance

TWO Assignments for my Unit 3 work. I'm posting them together so that they come from the same Scholar!

 

Assignment #1:

Introduction

In this assignment, you will learn about bonds and the financial terms used in bond markets. In addition, you will differentiate between discount and premium bonds, identify the factors that influence bond value, and learn how the TVM concept is used to price bonds.

Instructions

Answer the following questions and complete the following problems, as applicable. You may solve the following problems algebraically, or you may use a financial calculator or Excel spreadsheet. If you choose to solve the problems algebraically, be sure to show your computations. If you use a financial calculator, show your input values. If you use an Excel spreadsheet, show your input values and formulas.

Note: In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer. In this assignment, make you you respond to the Distinguished level questions to receive all possible points for the question/problem. Questions 4, 5, and 6 entail working quantitative problems demonstrating your understanding of bond valuation techniques. You may solve these problems using algebraic formulas, a financial calculator, or an Excel spreadsheet. My preference is using the MSWord format.

  1. "What does a call provision [call feature] allow [bond] issuers to do, and why would they do it" (Cornett, Adair, & Nofsinger, 2014)?

Distinguished: and states what additional compensation is paid, in addition to the bond principal, when a bond is called.

  1. "Provide the definitions of a discount bond and premium bond. Give examples" (Cornett, Adair, & Nofsinger, 2014, p. 178).

Distinguished: and explains why market interest changes are reflected in bond prices

  1. "Describe the differences in interest payments and bond prices between a 5 percent coupon bond and a zero coupon bond" (Cornett, Adair, & Nofsinger, 2014, p. 178).

Distinguished: and given a change in market interest rates, determines which of the two bonds would remain closer to its par value.

  1. "Calculate the price of a zero coupon bond that matures in 20 years if the market interest rate is 6.5 percent" (Cornett, Adair, & Nofsinger, 2014).
    • Assume semi-annual compounding.

Distinguished: and states why zero coupon bonds are sold at steep discounts

  1. "Compute the price of a 4.5 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent" (Cornett, Adair, & Nofsinger, 2014).
    • Assume interest payments are paid semi-annually, and solve using semi-annual compounding.

Distinguished: and explains why the bond is either a discount bond or a premium bond.

  1. "A 6.85 percent coupon bond with 26 years left to maturity is offered for sale at $1,035.25. What yield to maturity [interest rate] is the bond offering" (Cornett, Adair, & Nofsinger, 2014, p. 178)?
    • Assume interest payments are paid semi-annually, and solve using semi-annual compounding.

Distinguished: and explains what effect a decrease in the offered sales price would have on the yield to maturity.

 

Reference:

 

Cornett, M. M., Adair, T. A., & Nofsinger J. (2014). M: Finance (2nd ed.). New York, NY: McGraw-Hill.

 

________________________________________________________

 

Assignment #2

Introduction

Companies can raise money through common stocks. Investors buy stocks and get the benefits of ownership of a firm. How to price stocks is the main objective of this assignment, in which you will learn about the differences between common and preferred stocks, the different stock valuation models, and the major stock market indexes.

Instructions

Answer the following questions and complete the following problems, as applicable:

You may solve the following problems algebraically, or you may use a financial calculator or Excel spreadsheet. If you choose to solve the problems algebraically, be sure to show your computations. If you use a financial calculator, show your input values. If you use an Excel spreadsheet, show your input values and formulas.

Note: In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer. In this assignment, make you you respond to the Distinguished level questions to receive all possible points for the question/problem. Questions 4, 5, 6, 7, and 8 entail working quantitative problems demonstrating your understanding stock valuation techniques. You may solve these problems using algebraic formulas, a financial calculator, or an Excel spreadsheet. My preference is using the MSWord format.

  1. "As owners, what rights and advantages do shareholders obtain" (Cornett, Adair, & Nofsinger, 2014, p. 203)?

Distinguished: and describes disadvantages to owning stock.

  1. "Why might the Standard and Poor's 500 Index be a better measure of stock market performance than the Dow Jones Industrial Average" (Cornett, Adair, & Nofsinger, 2014)?

Distinguished: and explains why the Dow Jones Industrial Average is more popular than the Standard and Poor's 500.

  1. "What are the differences between common stock and preferred stock" (Cornett, Adair, & Nofsinger, 2014, p. 203)?

Distinguished: and describes the similarities between common stock and preferred stock

  1. "On March 14, 2013, the Dow Jones Industrial Average set a new high. The index closed at 14,539.14, which was up 83.86 points from the previous day's close of 14.455.28. What was the return (in percent to four decimal places) of the stock market for March 14, 2013" (Cornett, Adair, & Nofsinger, 2014)? HINT: the problem can be solved using a simple formula: FV = PV x (1 + i). Be sure to solve and show response out to four decimal places.

Distinguished: and identifies the three most recognized U.S. market indices

  1. "At your brokerage firm, it costs $9.50 per stock trade. How much money do you need to buy 300 shares of Time Warner, Inc. (TWX), which trades at $22.62" (Cornett, Adair, & Nofsinger, 2014)?

Distinguished: and states, based on the amount of commission paid, whether a traditional full-service broker or a discount broker is being used.

  1. "Financial analysts forecast Safeco Corporation (SAF) growth for the future to be a constant 10 percent. Safeco's recent dividend was $1.20. What is the value of Safeco stock when the required return is 12 percent" (Cornett, Adair, & Nofsinger, 2014, p. 205)?

Distinguished: and recalculates the value of stock assuming a one-percent increase in the growth rate

  1. "A preferred stock from Duquesne Light Company (DQUPRA) pays $2.10 in annual dividends. If the required return on the preferred stock is 5.4 percent, what is the value of the stock" (Cornett, Adair, & Nofsinger, 2014, p. 204)?

Distinguished: and explains why the growth rate on preferred stock dividends is 0%.

  1. "Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What is the stock price" (Cornett, Adair, & Nofsinger, 2014, p. 205)?

Distinguished: and explains why the P/E model computes what is referred to as the stock's relative value.

 

Reference

 

Cornett, M. M., Adair, T. A., & Nofsinger J. (2014). M: Finance (2nd ed.). New York, NY: McGraw-Hill.

 

 

Subject Mathematics
Due By (Pacific Time) 03/06/2015 10:00 pm
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