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CFA Level I Cost of Capital Lecture - Part 2 - by Mr. Arif Irfanullah
 
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This CFA Level I video covers concepts related to: • Cost of Debt • Yield to Maturity Approach • Debt Rating Approach • Cost of Preferred Stock • Cost of Common Equity • Capital Asset Pricing Model • Dividend Discount Model Approach • Bond Yield Plus Risk Premium Approach For more updated CFA videos, Please visit www.arifirfanullah.com.
Views: 26072 IFT
CFA Level 1- Question Bank- Cost of Equity using Bond Yield + Premium Approach
 
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FinTree website link: http://www.fintreeindia.com FB Page link :http://www.facebook.com/Fin... We love what we do, and we make awesome video lectures for CFA and FRM exams. Our Video Lectures are comprehensive, easy to understand and most importantly, fun to study with! This Video was recorded during a one of the CFA Classes in Pune by Mr. Utkarsh Jain.
FRM: TI BA II+ to compute bond yield (YTM)
 
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Given four inputs (price, term/maturity, coupon rate, and face/par value), we can use the calculator's I/Y to find the bond's yield (yield to maturity). For more financial risk videos, visit our website! http://www.bionicturtle.com
Views: 143463 Bionic Turtle
Risk Premium 1
 
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What is a risk premium? An introduction into what a bond is. Video by Chase DeHan, Assistant Professor of Finance at the University of South Carolina Upstate
Views: 17499 Harpett
Level I CFA: CF Cost of Capital-Lecture 2
 
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2018 Reading 36 2019 Reading 35 This CFA exam prep video Costs of the different sources of capital - Cost of debt - Cost of preferred stock - Cost of common equity Capital asset pricing model Dividend discount model Bond yield plus risk premium approach For the COMPLETE SET of 2018 Level I Videos sign up for the IFT Level I FREE VIDEOS Package: https://ift.world/free Subscribe now: http://www.youtube.com/user/arifirfanullah?sub_confirmation=1 For more videos, notes, practice questions, mock exams and more visit: https://www.ift.world/ Visit us on Facebook: https://www.facebook.com/Pass.with.IFT/
Views: 17454 IFT
calculate and interpret the cost of equity capital using the capital asset pricing model approach,
 
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calculate and interpret the cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yield-plus risk-premium approach;
Views: 27 Ted Stephenson
Treasury bond prices and yields | Stocks and bonds | Finance & Capital Markets | Khan Academy
 
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Why yields go down when prices go up. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/annual-interest-varying-with-debt-maturity?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/relationship-between-bond-prices-and-interest-rates?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
Views: 257761 Khan Academy
How to calculate the bond price and yield to maturity
 
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This video will show you how to calculate the bond price and yield to maturity in a financial calculator. If you need to find the Present value by hand please watch this video :) http://youtu.be/5uAICRPUzsM There are more videos for EXCEL as well Like and subscribe :) Please visit us at http://www.i-hate-math.com Thanks for learning
Views: 313805 I Hate Math Group, Inc
WACC, Cost of Equity, and Cost of Debt in a DCF
 
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In this WACC and Cost of Equity tutorial, you'll learn how changes to assumptions in a DCF impact variables like the Cost of Equity, Cost of Debt. By http://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" You'll also learn about WACC (Weighted Average Cost of Capital) - and why it is not always so straightforward to answer these questions in interviews. Table of Contents: 2:22 Why Everything is Interrelated 4:22 Summary of Factors That Impact a DCF 6:37 Changes to Debt Percentages in the Capital Structure 11:38 The Risk-Free Rate, Equity Risk Premium, and Beta 12:49 The Tax Rate 14:55 Recap and Summary Why Do WACC, the Cost of Equity, and the Cost of Debt Matter? This is a VERY common interview question: "If a company goes from 10% debt to 30% debt, does its WACC increase or decrease?" "What if the Risk-Free Rate changes? How is everything else impacted?" "What if the company is bigger / smaller?" Plus, you need to use these concepts on the job all the time when valuing companies… these "costs" represent your opportunity cost from investing in a specific company, and you use them to evaluate that company's cash flows and determine how much the company is worth to you. EX: If you can get a 10% yield by investing in other, similar companies in this market, you'd evaluate this company's cash flows against that 10% "discount rate"… …and if this company's debt, tax rate, or overall size changes, you better know how the discount rate also changes! It could easily change the company's value to you, the investor. The Most Important Concept… Everything is interrelated - in other words, more debt will impact BOTH the equity AND the debt investors! Why? Because additional leverage makes the company riskier for everyone involved. The chance of bankruptcy is higher, so the "cost" even to the equity investors increases. AND: Other variables like the Risk-Free Rate will end up impacting everything, including Cost of Equity and Cost of Debt, because both of them are tied to overall interest rates on "safe" government bonds. Tricky: Some changes only make an impact when a company actually has debt (changes to the tax rate), and you can't always predict how the value derived from a DCF will change in response to this. Changes to the DCF Analysis and the Impact on Cost of Equity, Cost of Debt, WACC, and Implied Value: Smaller Company: Cost of Debt, Equity, and WACC are all higher. Bigger Company: Cost of Debt, Equity, and WACC are all lower. * Assuming the same capital structure percentages - if the capital structure is NOT the same, this could go either way. Emerging Market: Cost of Debt, Equity, and WACC are all higher. No Debt to Some Debt: Cost of Equity and Cost of Debt are higher. WACC is lower at first, but eventually higher. Some Debt to No Debt: Cost of Equity and Cost of Debt are lower. It's impossible to say how WACC changes because it depends on where you are in the "U-shaped curve" - if you're above the debt % that minimizes WACC, WACC will decrease. Otherwise, if you're at that minimum or below it, WACC will increase. Higher Risk-Free Rate: Cost of Equity, Debt, and WACC are all higher; they're all lower with a lower Risk-Free Rate. Higher Equity Risk Premium and Higher Beta: Cost of Equity is higher, and so is WACC; Cost of Debt doesn't change in a predictable way in response to these. When these are lower, Cost of Equity and WACC are both lower. Higher Tax Rate: Cost of Equity, Debt, and WACC are all lower; they're higher when the tax rate is lower. ** Assumes the company has debt - if it does not, taxes don't make an impact because there is no tax benefit to interest paid on debt.
CFA Level I: Corporate Finance - Cost of Capital LOS A
 
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FinTree website link: http://www.fintreeindia.com FB Page link :http://www.facebook.com/Fin... These video series covers the following key area: -the weighted average cost of capital (WACC) of a company; -how taxes affect the cost of capital from different capital sources; -the use of target capital structure in estimating WACC and how target capital structure weights may be determined; -how the marginal cost of capital and the investment opportunity schedule are used to determine the optimal capital budget; -the marginal cost of capital’s role in determining the net present value of a project; -the cost of debt capital using the yield-to-maturity approach and the debt-rating approach; - the cost of noncallable, nonconvertible preferred stock; -the cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yield-plus risk-premium approach; -the beta and cost of capital for a project -uses of country risk premiums in estimating the cost of equity; -the marginal cost of capital schedule, explain why it may be upward-sloping with respect to additional capital, and calculate and interpret its break-points; - the correct treatment of flotation costs. We love what we do, and we make awesome video lectures for CFA and FRM exams. Our Video Lectures are comprehensive, easy to understand and most importantly, fun to study with! This Video lecture was recorded by our popular trainer for CFA, Mr. Utkarsh Jain, during one of his live CFA Level I Classes in Pune (India).
CFA Level I-R37- Cost of Capital- Part I
 
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The video covers first part ( out of two) of Cost of Capital, Reading 37 of CFA level I This video provides information about the following : 1. The weighted average cost of capital (WACC) . 2. Affect of taxes on cost of capital from different capital sources. 3. Alternative methods of calculating the weights used in the WACC, including the use of the company's target capital structure. 4. The marginal cost of capital and the investment opportunity schedule are used to determine the optimal capital budget. 5. The marginal cost of capital's role in determining the net present value of a project. 6. The cost of fixed rate debt capital using the yield-to-maturity approach and the debt -rating approach. 7. The cost of noncallable, nonconvertible preferred stock. 8. The cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yield-plus risk-premium approach. 9. The beta and cost of capital for a project. 10. The country equity risk premium in the estimation of the cost of equity for a company located in a developing market. 11. The marginal cost of capital schedule. 12. The correct treatment of flotation costs.
FINANCIAL STATEMENT ANALYSIS   Syllabus   ADVANCED  15  COST OF CAPITAL
 
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COST OF CAPITAL a calculate and interpret the weighted average cost of capital (WACC) of a company; b describe how taxes affect the cost of capital from different capital sources; c describe the use of target capital structure in estimating WACC and how target capital structure weights may be determined; d explain how the marginal cost of capital and the investment opportunity schedule are used to determine the optimal capital budget; e explain the marginal cost of capital’s role in determining the net present value of a project; f calculate and interpret the cost of debt capital using the yield-to-maturity approach and the debt-rating approach; COST OF CAPITAL g calculate and interpret the cost of noncallable, nonconvertible preferred stock; h calculate and interpret the cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yield-plus risk-premium approach; i calculate and interpret the beta and cost of capital for a project; j describe uses of country risk premiums in estimating the cost of equity; k describe the marginal cost of capital schedule, explain why it may be upward-sloping with respect to additional capital, and calculate and interpret its break-points; l explain and demonstrate the correct treatment of flotation costs.
Views: 24 VATUAE Jayakumar
Excel Finance Class 54: Bonds & Interest Rate Risk
 
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Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm Learn Interest Rate Risk: 1. The Longer The Maturity, The More YTM Affects Bond Price 2. The Lower The Coupon Rate, The More YTM Affects Bond Price
Views: 12874 ExcelIsFun
Financial Management - Lecture 13
 
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interest rates levels, nominal interest rates, determinants of interest rates, quoted interest rates, nominal interest rates, real interest rates,risk-free interest rates, real risk-free interest rates, nominal risk-free interest rates, quoted risk-free interest rates, inflation, premium, risk premium, inflation premium, purchasing power, purchasing power premium, default risk, default risk premium, liquidity risk. liquidity premium, maturity risk, maturity risk premium, volatility risk, price risk, interest rate risk, expected inflation, fungible, fungibility, marketable, marketability, reinvestment risk, TIPS, calculation risk, inflation-reporting risk, risk-free bonds, default-risk bonds, currency denomination.
Views: 28427 Krassimir Petrov
Bond Pricing, Valuation, Formulas, and Functions in Excel
 
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Premium Course: https://www.teachexcel.com/premium-courses/68/idiot-proof-forms-in-excel?src=youtube Excel Forum: https://www.teachexcel.com/talk/microsoft-office?src=yt Excel Tutorials: https://www.teachexcel.com/src=yt This tutorial will show you how to calculate bond pricing and valuation in excel. This teaches you how to do so through using the NPER() PMT() FV() RATE() and PV() functions and formulas in excel. To follow along with this tutorial and download the spreadsheet used and or to get free excel macros, keyboard shortcuts, and forums, go to: http://www.TeachMsOffice.com
Views: 189178 TeachExcel
What is COST OF EQUITY? What does COST OF EQUITY mean? COST OF EQUITY meaning & explanation
 
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What is COST OF EQUITY? What does COST OF EQUITY mean? COST OF EQUITY meaning - COST OF EQUITY definition - COST OF EQUITY explanation. Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license. In finance, the cost of equity is the return (often expressed as a rate of return) a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertake by investing their capital. Firms need to acquire capital from others to operate and grow. Individuals and organizations who are willing to provide their funds to others naturally desire to be rewarded. Just as landlords seek rents on their property, capital providers seek returns on their funds, which must be commensurate with the risk undertaken. Firms obtain capital from two kinds of sources: lenders and equity investors. From the perspective of capital providers, lenders seek to be rewarded with interest and equity investors seek dividends and/or appreciation in the value of their investment (capital gain). From a firm's perspective, they must pay for the capital it obtains from others, which is called its cost of capital. Such costs are separated into a firm's cost of debt and cost of equity and attributed to these two kinds of capital sources. While a firm's present cost of debt is relatively easy to determine from observation of interest rates in the capital markets, its current cost of equity is unobservable and must be estimated. Finance theory and practice offers various models for estimating a particular firm's cost of equity such as the capital asset pricing model, or CAPM. Another method is derived from the Gordon Model, which is a discounted cash flow model based on dividend returns and eventual capital return from the sale of the investment. Another simple method is the Bond Yield Plus Risk Premium (BYPRP), where a subjective risk premium is added to the firm's long-term debt interest rate. Moreover, a firm's overall cost of capital, which consists of the two types of capital costs, can be estimated using the weighted average cost of capital model. According to finance theory, as a firm's risk increases/decreases, its cost of capital increases/decreases. This theory is linked to observation of human behavior and logic: capital providers expect reward for offering their funds to others. Such providers are usually rational and prudent preferring safety over risk. They naturally require an extra reward as an incentive to place their capital in a riskier investment instead of a safer one. If an investment's risk increases, capital providers demand higher returns or they will place their capital elsewhere. Knowing a firm's cost of capital is needed in order to make better decisions. Managers make capital budgeting decisions while capital providers make decisions about lending and investment. Such decisions can be made after quantitative analysis that typically uses a firm's cost of capital as a model input.
Views: 3593 The Audiopedia
Interest Rates - Nominal vs Real: Inflation, Default, Maturity and Liquidity Risk
 
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This short lecture will present the financial definition of interest and discuss the factors that affect nominal interest rates; including inflation, default risk, maturity risk (yield curve) and liquidity risk. Learning business English is like learning a new language.
Views: 12998 etramway
Finding Bond Price and YTM on a Financial Calculator
 
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A brief demonstration on calculating the price of a bond and its YTM on a financial calculator
Relationship between bond prices and interest rates | Finance & Capital Markets | Khan Academy
 
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Why bond prices move inversely to changes in interest rate. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/treasury-bond-prices-and-yields?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/introduction-to-the-yield-curve?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
Views: 573939 Khan Academy
Market Risk Premium Formula | Calculation | Examples
 
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In this video on Market Risk Premium, we are going to learn what is market risk premium? formula to calculate market risk premium, calculations with practical examples. 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐌𝐚𝐫𝐤𝐞𝐭 𝐑𝐢𝐬𝐤 𝐏𝐫𝐞𝐦𝐢𝐮𝐦? ------------------------------------------------------ Market Risk Premium is the difference between the expected return from the investment and the risk free rate. 𝐌𝐚𝐫𝐤𝐞𝐭 𝐑𝐢𝐬𝐤 𝐏𝐫𝐞𝐦𝐢𝐮𝐦 𝐅𝐨𝐫𝐦𝐮𝐥𝐚 ------------------------------------------------------ Below is the formula to calculate market risk premium. 𝗠𝗮𝗿𝗸𝗲𝘁 𝗥𝗶𝘀𝗸 𝗣𝗿𝗲𝗺𝗶𝘂𝗺 𝗙𝗼𝗿𝗺𝘂𝗹𝗮 = 𝗘𝘅𝗽𝗲𝗰𝘁𝗲𝗱 𝗥𝗲𝘁𝘂𝗿𝗻 – 𝗥𝗶𝘀𝗸-𝗙𝗿𝗲𝗲 𝗥𝗮𝘁𝗲 𝐑𝐞𝐚𝐥 𝐌𝐚𝐫𝐤𝐞𝐭 𝐑𝐢𝐬𝐤 𝐏𝐫𝐞𝐦𝐢𝐮𝐦 𝐅𝐨𝐫𝐦𝐮𝐥𝐚 ---------------------------------------------------------------- Real Market Risk Premium formula = (1 + Nominal Rate / 1 + Inflation Rate) – 1 𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐨𝐟 𝐌𝐚𝐫𝐤𝐞𝐭 𝐑𝐢𝐬𝐤 𝐏𝐫𝐞𝐦𝐢𝐮𝐦 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧 --------------------------------------------------------------------------------- Here in the below given example, we have two investments and we have also the information for expected return and risk free rate. Expected Return for the Investment 1 = 20% Expected Return for the Investment 2 = 21% Risk free rate for the Investment 1 = 8% Risk free rate for the Investment 2 = 8% Now by using the formula we will calculate the Market Risk Premium Market Risk Premium Formula = Expected Return – Risk-Free Rate Investment 1 = 20% - 8% Market Risk Premium for Investment 1 = 12% Investment 2 = 21% - 8% Market Risk Premium for Investment 2 = 13% To know more about the Market Risk Premium, you can go this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/market-risk-premium/ Subscribe to our channel to get new updated videos. Click the button above to subscribe or click on the link below to subscribe - https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUw?sub_confirmation=1
Views: 708 WallStreetMojo
Default Risk Premium
 
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An Easy Overview Of "Default Risk Premium"
Views: 3151 Christopher Hunt
Bond Yields Don't Tell a Nice Story
 
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What do I do? Full-time independent stock market analyst and researcher: https://sven-carlin-research-platform.teachable.com/p/stock-market-research-platform Check the comparative stock list table on my Stock market research platform under curriculum preview! I am also a book author: Modern Value Investing book: https://amzn.to/2lvfH3t More about me and some written reports at the Sven Carlin blog: https://svencarlin.com Stock market for modern value investors Facebook Group: https://www.facebook.com/groups/modernvalueinvesting/ As an investor it is extremely important to keep an eye on bond yields as stock valuations depend on their risk premium. The higher interest rates are the lower are stock values. In this video we discuss treasury yields, what is the market's perception about them and how to position yourself and your portfolio.
Yield to Maturity
 
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Free Online Textbook @ https://businessfinanceessentials.pressbooks.com/ An example of calculating Yield-to-Maturity using the 5-key approach.
Views: 139090 Kevin Bracker
Finding YTM
 
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A brief demonstration on finding the Yield to Maturity of a bond
Interest Rate Formula
 
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A discussion of interest rates in terms of the real rate, inflation premium and risk premiums.
Views: 4635 Kevin Bracker
EXPERT SOLUTIONS
 
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http://bestsolutions.cu.cc/expert-solutions-21/ The earnings, dividends, and stock price of Shelby Inc. arc expected to grow at 7% per year in the future. Shelby's common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? If the firm's beta is 1.6, the risk-free rate is 9%, and the expected return on the market is 13%, then what would be the firm's cost of equity), based on the CAPM approach? If the firm's bonds earn a return of 12%, then what would be your estimate of return on stock using the over-own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the midpoint of the risk premium range of 4%) 12-1 Broussard Skateboard's sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 40%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. 15-3 Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk?
Views: 560 green anderson
Interest Rate and Stock Market [HINDI]
 
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Interest Rate and Stock Market returns are in inverse proportion to each other. In layman terms, if the interest rate increase then the returns from stock market reduces and vice versa. Bond yields are the precursor to the direction in which the stock market will move. The investment in the stock market depends on the premium it can generate compared to the safe investment options like Fixed Deposit etc. The reason being, as an investor i am willing to invest my money in riskier option if it can generate an additional return for me compared to safer options. In other words, i want a premium for the risk i am taking. The bond yield or interest rates also impact the profitability of the companies as it can increase their interest outflow. In low-interest rate regime, companies can borrow at lower rates. Thus, companies can utilize this money for their growth. If the bond yield or interest rate increase, the FII's also shift their partial investments from equity to debt. The most impacted are small and midcap stocks in case of increasing bond yield or interest rate. If you liked this video, You can "Subscribe" to my YouTube Channel. The link is as follows https://goo.gl/nsh0Oh By subscribing, You can daily watch a new Educational and Informative video in your own Hindi language. For more such interesting and informative content, join me at: Website: http://www.nitinbhatia.in/ T: http://twitter.com/nitinbhatia121 G+: https://plus.google.com/+NitinBhatia #NitinBhatia
Views: 18414 Nitin Bhatia
Book Value vs Market Value vs Face Value of Bonds: How to Keep Them Straight
 
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You’ll learn about the book value vs market value vs face value of bonds in this tutorial, and you’ll understand how to calculate and project them in financial models. https://breakingintowallstreet.com/ "Financial Modeling Training And Career Resources For Aspiring Investment Bankers" Resources: https://youtube-breakingintowallstreet-com.s3.amazonaws.com/Book-Value-vs-Face-Value-Slides.pdf https://youtube-breakingintowallstreet-com.s3.amazonaws.com/Book-Value-vs-Face-Value.xlsx Table of Contents: 3:06 Excel Examples 11:04 Combined Example 14:46 Recap and Summary SHORT ANSWER: Face Value is the amount of Debt that a company issues, pays interest on, and must repay upon maturity. It is affected ONLY by Debt issuances, principal repayments, and Accrued or “Paid-in-Kind” (PIK) Interest. Book Value is the Debt that shows up on a company’s Balance Sheet under Liabilities & Equity, but it is NOT necessarily the amount it pays Interest on or what it must eventually repay. It’s affected by everything above (issuances, repayments, and accrued interest), plus Issuance Fees, any Discount or Premium when the bond is first issued, and the amortization of both those items. Market Value is what someone else would pay to buy the company’s Debt on the secondary market if it trades like that. It’s affected by interest payments, market interest rates on similar Debt, and future repayment upon maturity. In practice, the bond’s coupon rate vs market rates, as well as the credit default risk of the issuer, make the biggest impact. EXCEL EXAMPLES: Toro is spending a lot and must issue additional Debt to fund operations in several years. The Face Value of Debt goes up when new Debt is issued and down when there’s a repayment or maturity. The Book Value of Debt also changes based on these, but we also must deduct the 2% financing fee on new issuances and add the amortization of these financing fees over 10 years. We don’t know enough to determine the Market Value since it depends on current market rates vs the 6.1% coupon rate the company is currently paying. In another example, Atlassian has issued a Convertible Bond that matures in 5 years, if it’s not converted into Equity before then. Convertible Bonds are often separated into Equity and Debt components to reflect their dual nature, and the Book Value here equals the Face Value minus the Unamortized Issuance Fees minus the Debt Discount, which represents the difference in value between a traditional, non-convertible bond with a higher interest rate and the much-lower-rate convertible bond. The Face Value here never changes until the end because there are no additional issuances, there’s no accrued interest, and there’s only the single maturity at the very end. Cash Interest never changes since it’s always based on this constant Face Value and a constant interest rate. The Book Value keeps increasing as the Debt Discount is amortized over time and as the Issuance Fees are also amortized, but it finally reaches $0 at the same time as the Face Value. We don’t know enough to determine the Market Value, as we’d need to know the prevailing market interest rates on similar bonds and Atlassian’s default risk. ONE EXAMPLE TO RULE THEM ALL: Assume that a company issues a $1,000 10-year bond at a 5.00% coupon rate vs prevailing market rates of 6.35% on similar bonds. There are no principal repayments, and the interest is 100% Cash. There is a 2% issuance fee. Due to the below-market rate, the bond is issued at a $100 Discount. The Face Value is $1,000 initially, and it never changes until maturity. The Cash Interest is 5% * $1,000 = $50 per year until maturity. The initial Book Value is the $1,000 Face Value – $100 Discount – $20 Issuance Fee = $880. The Book Value will change according to the amortization of the Discount and the amortization of the Issuance Fees each year. Book Value, Year 1: $880 + $100 / 10 + $20 / 10 = $892 Book Value, Year 2: $892 + $100 / 10 + $20 / 10 = $904 The Market Value is initially the $1,000 Face Value minus the $100 Discount (verify with the PRICE function in Excel), so $900. We don’t know exactly how it will change over time because we don’t know future interest rates, but if rates go up, the Market Value will go down, and if credit default risk goes up, the Market Value will also go down (and vice versa for both of these). Does Book Value vs Market Value vs Face Value for Bonds Matter? In most cases, these distinctions don’t make a huge difference. If you’re under time pressure, you can simplify all this and include only Issuances and Repayments to project Debt. But interview questions on these topics could still come up, and if a company has a Convertible Bond or a normal bond issued at a big discount or premium, the Book Value vs Face Value distinction matters since interest is based on Face Value.
Types of Bonds & Debentures - Hindi
 
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Various types of bonds and debentures are explained in hindi. You must know terms, risks & returns in different types of debentures or bonds before you invest in them. Types of bonds or debentures include secured & unsecured bonds, convertible & non-convertible debentures, redeemable and irredeemable bonds, registered and bearer debentures, callable and puttable bonds, zero coupon bonds and premium bonds, subordinated bonds and participating debentures. You can invest in corporate bonds & debentures, government bonds and tax saving bonds. Related Videos: Bonds vs Debentures - https://youtu.be/BdMg5RmMj_0 Shares vs Debentures (Bonds) - https://youtu.be/afSACc6c2c0 How to Invest in Bonds & Debentures - https://youtu.be/hC9OsIzAoEk हिंदी में various types के bonds और debentures को समझाया गया है। आपको invest करने से पहले different types के debentures या bonds के rules, risks और returns का पता होना चाहिए। Share this video: https://youtu.be/5YN_Uo7stms Subscribe To Our Channel and Get More Finance Tips: https://www.youtube.com/channel/UCsNxHPbaCWL1tKw2hxGQD6g To access more learning resources on finance, check out www.assetyogi.com In this video, we have explained: What are the different types of bonds and debentures? What are secured bonds? What are unsecured debentures? What do you mean by cumulative or non-cumulative bonds or debentures? What are redeemable bonds / debentures? Are irredeemable debentures allowed in India? What are convertible debentures? What are non-convertible debentures? What do you understand by registered and bearer bonds and debentures? What is a callable bond or debenture? What is a puttable bond or debenture? What is a zero coupon bond? What is a premium bond? What is the meaning of subordinated bond? What is participating bond or debenture? Make sure to like and share this video. Other Great Resources AssetYogi – http://assetyogi.com/ Follow Us: Google Plus – https://plus.google.com/+assetyogi-ay Pinterest - http://pinterest.com/assetyogi/ Twitter - http://twitter.com/assetyogi Facebook – https://www.facebook.com/assetyogi Linkedin - http://www.linkedin.com/company/asset-yogi Instagram - http://instagram.com/assetyogi Hope you liked this video in Hindi on “Types of Bonds and Debentures"
Views: 23179 Asset Yogi
The Basics of Bonds Valuation
 
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"Hands-on" calculation of bond price on a spreadsheet, given coupon rate, maturity and YTM
Views: 6113 Jean-Charles Bagneris
CFA Tutorial: Fixed Income (Know How to Calculate Risk Premium)
 
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Download Fixed Income Question Bank: http://www.edupristine.com/ca/free-10-day-course/cfa-fixed-income/ Risk premium is the minimum amount of money by which the expected return on a risky asset must exceed the known return on a risk-free asset, or the expected return on a less risky asset, in order to induce an individual to hold the risky asset rather than the risk-free asset. About EduPristine: Trusted by Fortune 500 Companies and 10,000 Students from 40+ countries across the globe, EduPristine is one of the leading Training provider for Finance Certifications like CFA, PRM, FRM, Financial Modeling etc. EduPristine strives to be the trainer of choice for anybody looking for Finance Training Program across the world. Subscribe to our YouTube Channel: http://www.youtube.com/subscription_center?add_user=edupristine Visit our webpage: http://www.edupristine.com/ca
Views: 1349 EduPristine
CFA Level 1- Corporate Finance- Formula Review Session - Part 1(of 2)
 
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The subsequent parts of these videos are available to FinTree on-line program subscribers, to know more visit: FinTree website link: http://www.fintreeindia.com FB Page link :http://www.facebook.com/Fin... We love what we do, and we make awesome video lectures for CFA and FRM exams. Our Video Lectures are comprehensive, easy to understand and most importantly, fun to study with! This Video was recorded during a one of the CFA Level I Revision Classes in Pune by Mr. Utkarsh Jain. This Video tutorial explains logic behind the formula's of CFA level I Corporate Finance. Formula's Covered in this series are : 1.NPV 2.IRR 3.Payback Period 4.Discounted Payback period 5.Profitability Index 6.Crossover Rate 7.WACC 8.After Tax cost of Debt 9.Cost of Preferred Stock 10.Cost of Common Equity 11.Cost of Common Equity With Country Risk Premium 12.Country Risk premium 13.Break Point 14.Beta 15.Pure Play Beta 16.Correct treatment of Floatation Cost 17. DOL 18. DFL 19. DTL 20. Breakeven Quantity of Sales 21. Operating Breakeven Quantity of Sales 22. EPS after Repurchase 23. BVPS after Repurchase 24. Ex- Dividend Date 25.Current Ratio 26.Quick Ratio 27.Turnover Ratio’s 28.Number of Days Ratio’s 29.Operating Cycle 30.Cash Conversion Cycle 31.Annual Cost of Trade Credit 32.Holding Period Yield 33.Effective Annual Yield 34.Bond Equivalent yield 35.Money Market yield 36.Bank Discount Yield To buy this formula review Series of CFA Level I, visit us at http://fintreeindia.com/
Who Called My Bond?
 
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This video explains the meaning of callable bonds and why these types of bonds are issued. It also shows why they may have a higher coupon rate and who benefits most from the call feature of a bond. Questions or Comments? Have a question or topic you’d like to learn more about? Let us know: Twitter: @ZionsDirectTV Facebook: www.facebook.com/zionsdirect Or leave a comment on one of our videos. Open an Account: Begin investing today by opening a brokerage account or IRA at www.zionsdirect.com Bid in our Auctions: Participate in our fixed-income security auctions with no commissions or mark-ups charged by Zions Direct at www.auctions.zionsdirect.com
Views: 13817 Zions TV
FRM: How to get yield to maturity (YTM) with Excel & TI BA II+
 
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Yield to maturity (YTM, yield) is the bond's internal rate of return (IRR). It is the rate that discounts future cash flows to the current market price. For more financial risk management videos, visit our website at http://www.bionicturtle.com
Views: 227935 Bionic Turtle
Fixed-Income Securities - Lecture 05
 
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Time Value of Money, TVM, present value, future value, fundamental value, intrinsic value, discounted value, discounting, compounding, discount rate, discount factor, additivity, annuity, ordinary annuity, annuity due, installment, required rate of return, yield, required yield, comparable bond, comparable risk, CAPM, option-free bond, straight bond, coupon bond, zero-coupon bond, price-yield relationship, price-yield curve, convexity, at a discount, discount bond, at a premium, price premium, premium bond, deep-discount bond,
Views: 11137 Krassimir Petrov
CAPM Capital Asset Pricing Model in 4 Easy Steps - What is Capital Asset Pricing Model Explained
 
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OMG wow! I'm SHOCKED how easy clicked here http://www.MBAbullshit.com for CAPM or Capital Asset Pricing Model. This is a model applied to indicate an investor's "expected return", or how much percentage profit a company investor ought to logically demand to be a "fair" return for making investments into a company. http://mbabullshit.com/blog/2011/08/06/capm-capital-asset-pricing-model/ To find this, yet another question can be queried: Just how much is the sound "decent" percentage % profit that a financier should probably receive if he invests in a business (having comparatively high risk) in contrast to putting his money in government bonds which might be regarded to be "risk free" and instead of putting his hard earned cash in the general share market presumed to offer "medium" risk? Visibly, it is almost only "fair" that in fact the investor receives a gain higher compared to the government bond percentage (due to the reason that the solitary enterprise possesses higher risk). It's moreover only just that he should expect a return larger than the broad stock exchange yield, because the specific business enterprise has higher risk compared to the "medium risk" general stock market. So just as before,how much exactly should this investor fairly receive as a smallest expected return? This is where the CAPM Model or Capital Asset Pricing Model comes in. The CAPM Formula includes all these variables simultaneously: riskiness of the individual firm depicted by its "beta", riskiness of the universal stock market, rate of interest a "risk free" government bond would give, as well as others... and then spits out an actual percent which your investor "should be allowed" to take for investing his or her hard earned money into this "riskier" single firm. This particularly exact percent is known as the "expected return", given that it can be the yield that he should "expect" or require to obtain if he invests his hard earned cash into a specific firm. This precise percentage is known as the "cost of equity". The CAPM Model or CAPM Formula looks something like this: Expected Return = Govt. Bond Rate + (Risk represented by "Beta")(General Stock Market Return --Govt. Bond Rate) Utilizing this formula, you are able to see the theoretically exact rate of return theindividual business enterprise investor ought to reasonably expect for his or her investment, if the CAPM Model or Capital Asset Pricing Model is to be held. http://www.youtube.com/watch?v=LWsEJYPSw0k What is CAPM? What is the Capital Asset Pricing Model?
Views: 520112 MBAbullshitDotCom
Excel Finance Class 57: Compare Cash Flows For a Coupon & A Zero Coupon Bond
 
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Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm Compare Cash Flows For a Coupon & A Zero Coupon Bond and see why some prefer one over the other.
Views: 5776 ExcelIsFun
explain an interest rate as the sum of a real risk-free rate
 
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explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct types of risk;
Views: 87 Ted Stephenson
Excel Finance Class 51: Par - Discount - Premium Bonds
 
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Download Excel workbook http://people.highline.edu/mgirvin/ExcelIsFun.htm Learn about how Bonds can be sold at Par, Discount or Premium. See how to Create an IF Function formula to indicate whether the Bond is sold at a Discount, Premium or Par.
Views: 7383 ExcelIsFun
Valuation of Bonds Part 1
 
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Compares premium bond X to discount bond Y as they approach maturity (Problem 7-18 in Westerfield et al.)
Views: 1437 collegefinance
Bond pricing interest rate changes
 
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A look at what happens to bond prices when interest rates change.
Views: 2671 BonaResponds
Weighted Average Cost of Capital (WACC)
 
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This video explains the concept of WACC (the Weighted Average Cost of Capital). An example is provided to demonstrate how to calculate WACC. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 379496 Edspira
Real and nominal return | Inflation | Finance & Capital Markets | Khan Academy
 
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Inflation and real and nominal return. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/inflation-tutorial/real-nominal-return-tut/v/calculating-real-return-in-last-year-dollars?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/inflation-tutorial/inflation-scenarios-tutorial/v/hyperinflation?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: If the value of money is constantly changing, can we compare investment return in the future or past to that earned in the present? This tutorial focuses on how to do this (another good tutorial to watch is the one on "present value"). About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
Views: 177172 Khan Academy
Investing in Bonds
 
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What is the risk in bonds? How are they bought, sold, and quoted. What are municipal bonds and T-bills, and accrued interest? What is a Unit Investment Trust? What is a zero coupon bond?
Views: 8543 Craig Lewis
Introduction to Bonds and Bond Valuation
 
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Professor David Hillier, University of Strathclyde; Short videos for my students Check out www.david-hillier.com for my personal website.
Views: 7180 David Hillier
CFA level I - Relationship between Coupon Rate and Bond Duration
 
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FinTree website link: http://www.fintreeindia.com FB Page link :http://www.facebook.com/Fin... We love what we do, and we make awesome video lectures for CFA and FRM exams. Our Video Lectures are comprehensive, easy to understand and most importantly, fun to study with! This Video lecture was recorded by our popular trainer for CFA, Mr. Utkarsh Jain, during one of his live CFA Level I Classes in Pune (India).
V7C. The Risk-Free Rate
 
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The rate used to discount future cash flows is based on the risk-free rate plus a premium for the risk of those particular cash flows. In effect, the risk-free rate is the lowest return, or the lowest rate of interest, that investors would be willing to accept (for a riskless investment). This video goes into what the risk-free rate is and what benchmarks might be used to establish its value.
Views: 9228 savingandinvesting
FIN 515 Week 3 HomeWork
 
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http://www.onlinehomework.guru/product/fin-515-week-3-homework/ 29. Suppose the term structure of risk-free interest rates is as shown below: Term 1 year 2 years 3 years 5 years 7 years 10 years 20 years Rate (EAR, %) 1.99 2.41 2.74 3.32 3.76 4.13 4.93 a. Calculate the present value of an investment that pays $1000 in two years and $2000 in five years for certain. b. Calculate the present value of receiving $500 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average of the rate in year 3 and year 5.) *c. Calculate the present value of receiving $2300 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.) 31. What is the shape of the yield curve given the term structure in Problem 29? What expectations are investors likely to have about future interest rates? 2. Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 6. Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1034.74. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9% APR, what will the bond's price be? 7. Suppose a five-year, $1000 bond with annual coupons has a price of $900 and a yield to maturity of 6%. What is the bond's coupon rate? 10. Suppose a seven-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.75%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7% (APR with semiannual compounding), what price will the bond trade for? 28. The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.1 AAA corporate 3.2 BBB corporate 4.2 B corporate 4.9 a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why? 30. HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the yield to maturity for five-year (annual-pay) coupon corporate bonds of various ratings: Rating AAA AA A BBB BB YTM 6.20% 6.30% 6.50% 6.90% 7.50% a. Assuming the bonds will be rated AA, what will the price of the bonds be? b. How much total principal amount of these bonds must HMK issue to raise $10 million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.) c. What must the rating of the bonds be for them to sell at par? d. Suppose that when the bonds are issued, the price of each bond is $959.54. What is the likely rating of the bonds? Are they junk bonds? 1. The figure below shows the one-year return distribution for RCS stock. Calculate a. The expected return. b. The standard deviation of the return. 30. What does the beta of a stock measure? 35. Suppose the market risk premium is 5% and the risk-free interest rate is 4%. Using the data in Table 10.6, calculate the expected return of investing in 37. Suppose the market risk premium is 6.5% and the risk-free interest rate is 5%. Calculate the cost of capital of investing in a project with a beta of 1.2. 2. You own three stocks: 600 shares of Apple Computer, 10,000 shares of Cisco Systems, and 5000 shares of Colgate-Palmolive. The current share prices and expected returns of Apple, Cisco, and Colgate-Palmolive are, respectively, $500, $20, $100 and 12%, 10%, 8%.
Views: 1140 Hallowell Pinder
बिना Risk मुनाफा Fix! | Earn 9% On Your Bank Balance🔥🔥🔥
 
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This video covers detailed review and analysis of 'Franklin India Ultra Short Bond Fund - Super Institutional Plan' I earned more than 9% on my bank balance in last 1-Year without any Risk, Lock-In and Taxation. You can also easily get 8% to 9% return on your bank balance or emergency fund if you are willing to earn it! ♥️ To Avail Lifetime Services From JHILS 100% FREE! ➡️Open Zero Brokerage Online Trading & Investment (Demat) Account With Zerodha: Link: https://zerodha.com/open-account?c=ZMPVKW ♥️ Premium Offer For Mutual Fund Investing: ➡️Brought To You By JHILS In Partnership With Kuvera: 👉Start Investing In Direct Mutual Funds For 100% FREE | Switch Your Regular Plans To Direct Plans In One Click | Manage All Your Family Accounts At One Place - Get 200 Coins As A Sign Up Bonus By JHILS! Link: https://kuvera.in/signup?referral=JHILS ➡️Related Topics: Save Tax & Create Wealth Simultaneously: https://youtu.be/kSS861aPP5I Best Tax Savings (ELSS) Mutual Fund: https://youtu.be/kbbhgwpdEOk Loss In Delaying Your SIP: https://youtu.be/un8nlsoNbzc Like & Follow Us On: Website: http://www.jhils.com/?m=1 Facebook: https://www.facebook.com/jhilsindia/ Instagram: https://www.instagram.com/jhilsindia/ Twitter: https://www.twitter.com/JhilsIndia LinkedIn: https://www.linkedin.com/in/jhils-india-212572158/ जय हिंद | वन्दे मातरम् | वासुधैव कुटुम्बकम #mutualfunds #jhils
Views: 9579 JHILS