Premium Essay

Corporate Finance: the Core

In: Business and Management

Submitted By ThuNderBuLL
Words 2605
Pages 11
Corporate Finance: The Core (Berk/DeMarzo)
Chapter 8 - Valuing Bonds

8.1 Bond Cash Flows, Prices, and Yields 1)
Which of the following statements is false? A)
Bonds are a securities sold by governments and corporations to raise money from investors today in exchange for promised future payments. B)
By convention the coupon rate is expressed as an effective annual rate. C)
Bonds typically make two types of payments to their holders. D)
The time remaining until the repayment date is known as the term of the bond. Answer:
B
Explanation:
A)
B)

C)

D)

Diff: 1 Topic: 8.1 Bond Cash Flows, Prices, and Yields Skill: Definition

2)
Which of the following formulas is incorrect? A)
Yield to maturity for an n-period zero-coupon bond = [pic] B)
Price of an n-period bond = [pic] + [pic] + ... + [pic] C)
Price of an n-period bond = Coupon × [pic] + [pic] D)
Coupon = [pic] Answer:
A
Explanation:
A)
B)

C)

D)

Diff: 2 Topic: 8.1 Bond Cash Flows, Prices, and Yields Skill: Conceptual

3)
Which of the following statements is false? A)
The IRR of an investment in a zero-coupon bond is the rate of return that investors will earn on their money if they buy a default free bond at its current price and hold it to maturity. B)
The yield to maturity of a bond is the discount rate that sets the future value of the promised bond payments equal to the current market price of the bond. C)
Financial professionals also use the term spot interest rates to refer to the default-free zero-coupon yields. D)
When we calculate a bond's yield to maturity by

Similar Documents

Premium Essay

Course Outline

...POST GRADUATE PROGRAMME IN MANAGEMENT AY 2015-16 TERM: III TITLE OF THE COURSE: FINANCE II CREDITS: 4 Name of the Faculty Arnab Bhattacharya Gaurav Singh Chauhan Kousik Guhathakurta Radha M. Ladkani Faculty Block/ Room No. J BLOCK C-102 A-106 J BLOCK Email Telephone Number arnabb@iimidr.ac.in gauravs@iimidr.ac.in kousikg@iimidr.ac.in; radhal@iimidr.ac.in; 0731-2439589 0731-2439592 0731-2439518 0731-2439698 COURSE DESCRIPTION The second core course in Finance deals with the core corporate finance functions in an applied setting. The participants are exposed to real world corporate finance decisions to be taken up by managers for creating value. Such an exposure is accomplished through a mix of theory and practice. The pedagogy employed reflects a judicious mix of case discussions, lectures and problem solving approach. COURSE OBJECTIVES The objective is to familiarize participants with the three major decision areas of Corporate Finance, viz. the investments, financing and earnings distribution decisions. Subsequently the participants are to be offered an integrated view of the decision areas by discussing the issues in corporate valuations and risk management. The course aims at sharpening the financial decision making skills of the participants. EXPECTED LEARNING OUTCOMES AND ASSOCIATED MEASURES At the end of the course student is expected to accomplish the following learning outcomes. Alignment of Course Learning Outcomes (CLOs)...

Words: 1664 - Pages: 7

Premium Essay

Akount

...In Partnership with COURSERA The online MBA that brings you more. Powerful blocks of business knowledge that you can stack to build your iMBA. Global experience. l Colleagues, customers, competitors, and ideas come from all over the world. A good strategist, manager, or executive in any field recognizes the value of crossing geographic boundaries and gaining international experience. In the iMBA we make that happen. l richly diverse MOOC world with the selective world of a very personalized online degree program. Every course has a MOOC portion and a for-credit portion, blending the global experience with the intimate cohort experience. Stackable Specializations. l We call the blocks of business knowledge Specializations. With each Specialization, you are eligible for certification. Once you complete the full set of Specializations, you are eligible for a full MBA. l We created the program to integrate the open, democratic, and Bold leadership. Bright minds. Bridge to practice. Every Specialization is self-contained. Each one brings all the pieces you need together into one pre-integrated package of business know-how. l The Specializations draw on not only different academic departments within the College of Business, but also other high-ranked programs at the University of Illinois, as well as leaders in the industry. More flexibility. l Start anywhere, anytime, and apply what you learn Professors Aric Rindfleisch...

Words: 749 - Pages: 3

Premium Essay

Nbfi

...was enacted in 1993 (Barai et al. 1999). Industrial Promotion and Development Company (IPDC) was the first private sector NBFI in Bangladesh, which started its operation in 1981. Since then the number has been increasing and in December 2006 it reached 29. Of these, one is government owned, 15 are local (private) and the other 13 are established under joint venture with foreign participation. 1.1 Recent Development & Activities of NBFIs The major business of most NBFIs in Bangladesh is leasing, though some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing, venture capital financing etc. Lease financing, term lending and housing finance constituted 94 percent of the total financing activities of all NBFIs up to June 2006. A break-up of their financing activities reveals that the share of leasing and housing finance in the total investment portfolio of NBFIs...

Words: 4460 - Pages: 18

Free Essay

Tata Capital

...TATA Capital Ltd. - Company overview History Tata Capital Limited is a subsidiary of Tata Sons Limited. The Company is registered with the Reserve Bank of India as a Systemically Important Non Deposit Accepting Core Investment Company and offers through itself and its subsidiaries fund and fee-based financial services to its customers. Headquartered in Mumbai, it has registered offices of its subsidiaries in Singapore and London. It is a trusted and customer-centric, one-stop financial solutions partner. It caters to the diverse needs of retail, corporate and institutional customers directly or through its subsidiaries.   Core Value: ‘We only do what’s right for you’ (“Karein Wahi Jo Aapke Liye Sahi”)   The Tatas are amongst the most respected business houses in the world. Tata Capital aims to bring the trust and expertise of the Tatas to an economically and socially relevant sector like financial services.  The essence of brand Tata Capital is encapsulated in our brand proposition – ‘We only do what’s right for you'. The proposition reflects our strong resolve to deliver financial solutions that are ‘right’ for our customers and the society at large.  Tata Capital seeks to build strong relationships with its customers and deliver superior and consistent customer experience across all products and touch-points. Vision The most admired financial solutions partner. Mission We will only do what’s right for all our stakeholders, including our employees, customers...

Words: 2376 - Pages: 10

Premium Essay

Ab Bank

...Profile of ------------------------------------------------- AB bank Background of AB Bank Limited: AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st December 1981 as Arab Bangladesh Bank Limited and started its operation with effect from April 12, 1982. During the last 28 years, AB Bank Limited has opened 81 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World. In spite of adverse market conditions, AB Bank Limited which turned 28 this year, concluded the 2008 financial year with good results. The Bank’s consolidated profit after taxes amounted to Taka 230 cr which is 21% higher than that of 2007. The asset base of AB grew by 32% from 2007 to stand at over Tk 8,400 cr as at the end of 2008. The Bank showed strong growth in loans and deposits. Deposit of the Bank rose by Tk. 1518 cr ie., 28.45% while the diversified Loan Portfolio grew by over 30% during the year and recorded a Tk 1579 cr increase. Foreign Trade Business handled was Tk 9,898 cr indicating a growth of over 40% in 2008. The Bank decided to change its traditional color and logo to bring about a fresh approach in the financial world; an approach...

Words: 1381 - Pages: 6

Premium Essay

Consulting

...Programmes available for non-FBE students Programme School of Business Business School of Economics and Finance Economics Finance Major X √ √ Minor √ √ √ II. GPA Requirement A yearly GPA of 3.0 of above as of August 31 (excluding Summer Semester) at the end of the first year of study must be obtained for eligibility to declare any major or minor offered by the Faculty of Business and Economics. For students who fail to meet the GPA requirement at the end of their second year of study, their declaration of FBE major/minor will be removed from the SIS by their home Faculty. III. Requirements for Major Programmes Students are required to complete 60 credits of prescribed courses for each major as follows: (A) Majors offered by the School of Economics and Finance 1. Major in Economics (60 credits) Course code Course Credits Year 1 courses: 12 credits ECON1001 Introduction to economics I 6 ECON1002 Introduction to economics II 6 Year 2 and Year 3 courses: 48 credits ECON2101 Microeconomic theory or 6 ECON2113 Microeconomic analysis 6 ECON2102 Macroeconomic theory or Macroeconomic analysis ECON2114 ECONxxxx/ Year two/Year three courses listed in Economics 36 FINAxxxx or Finance electives Total: 60 2. Major in Finance (60 credits) Course code Course Year 1 courses: 18 credits BUSI1002 Introduction to accounting ECON1001 Introduction to economics I FINA1003 Corporate finance Year 2 and Year 3 courses: 42 credits ECON2101 Microeconomic theory or ECON2113 Microeconomic analysis...

Words: 1346 - Pages: 6

Premium Essay

Gcu Finance

... Franco Modigliani Professor of Finance and Economics, Sloan School of Management, Massachusetts Institute of Technology, Consulting Editor Financial Management Adair Excel Applications for Corporate Finance First Edition Block and Hirt Foundations of Financial Management Thirteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Ninth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Edition First Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Sixth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Fifth Edition Chew The New Corporate Finance: Where Theory Meets Practice Third Edition DeMello Cases in Finance Second Edition Grinblatt (editor) Stephen A. Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Helfert Techniques of Financial Analysis: A Guide to Value Creation Eleventh Edition Higgins Analysis for Financial Management Ninth Edition Kester, Ruback, and Tufano Case Problems in Finance Twelfth Edition Ross, Westerfield, and Jaffe Corporate Finance Eighth Edition Ross, Westerfield, Jaffe, and Jordan Corporate Finance: Core Principles and Applications Second Edition Ross, Westerfield, and Jordan Essentials of Corporate Finance Sixth Edition Ross, Westerfield and Jordan Fundamentals of Corporate Finance Eighth Edition Shefrin Behavioral Corporate Finance: Decisions that Create Value First...

Words: 255 - Pages: 2

Premium Essay

Finance

...as preparing forms and financial statements. It is a good job for people who want to work independently and are very organized (this is only a very brief description, if you are interested in accounting, consult your accounting instructor for more information). Finance: The financial manager or consultant places primary emphasis on decision making. It uses the financial statements prepared by accountants to make decisions about the firm’s financial condition and to advise others about possible losses and profits. In some cases, finance is more a type of leadership position. A financial manager has to deal not only with finance, but also with economics, accounting, statistics, math, and management. For example, people working with stocks and bonds have to understand and analyze how the underlying companies are performing. How a given company is going to perform during recession? Should they sell or buy stocks or bonds. How a decrease in the interest rate in England may affect the projects a company has in that country. Finance also deals a lot with risk. Derivative securities (options, futures, swaps, etc) are used to hedge against possible increase in risk. Risk managers are in great demand everywhere. Most finance majors find jobs in banks and other financial institutions, government, real estate, consultant companies, insurance, investment companies, stock market exchanges, fundraising, and any firm that needs someone to make financial decisions....

Words: 632 - Pages: 3

Premium Essay

Hghfgh

...added aspects of Operations Management such as purchasing, material requirements planning, inventory control and project management are also covered. 3. Learning Outcomes: Upon successful completion of the module the students will be able to: describe how organisations can reduce waste and improve quality. explain the impact and importance of the customer-supplier-competitor relationship within business operations. apply quantitative tools and techniques for planning, predicting, measuring and monitoring operations. base strategic decisions on information derived from these tools and techniques. understand the relationship between operations and each of the other major business functions such as Marketing, Human Resources, Finance. describe how operations strategies can enhance the effectiveness of the business. recognise the importance of accurately predicting demand and adjusting capacity in response to demands 4. Indicative Content • Design of production and information systems • Just-in-time/lean production...

Words: 3197 - Pages: 13

Premium Essay

Bum Bholenath

...2013-15 Trimester 5 Course List Area Course Code Course General Management SB01GNM203 Business Simulation (Core) General Management SB01GNM204 Business Ethics and Corporate Governance (Core) Global Course Global Course Global Course Finance HRM Entrepreneurship Marketing Finance HRM Marketing Finance Marketing Operations Finance HRM Marketing Finance HRM Marketing SB01GLS203 SB01GLS204 SB01GLS206 SB01FIN202 SB01HRM206 SB01ENT205 SB01MKT202 SB01FIN203 German-2 Spanish-2 French-2 Project and Infrastructure Finance Life space Life roles Entreprenurial Marketing International Marketing Derivatives and Risk Management Credits Faculty 3 Prof. Rajkumar Phatate 3 Prof. Vinayak 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 3 3 3 3 Prof. Chitra Dandawate Prof. Ganeshdatta Podar Prof. Neeta Sharma Prof. Anil Mendhi Prof. Indira Parikh Prof. Sajith Narayan Prof. Meenakshi Rawani Prof. Anil Mendhi Prof. Diganta Chakrabarti Prof. Meenakshi Rawani Prof. Manoj Kumar Prof. R G Nambiar Prof. Khalid Sheikh Prof. Amarendra Sahoo Prof. Shilpa Shinde Prof. Pranab Deb Prof. Salim Shamsher Prof. P A Noronha Prof. Sushil Bahl Basket Basket 1 Basket 2 Basket 3 Basket 3 Basket 3 Basket 4 Basket 4 Basket 4 Basket 5 Basket 5 Basket 5 Basket 6 Basket 6 Basket 6 Basket 6 Basket 7 Basket 7 Basket 7 Basket 8 Basket 8 Basket 8 SB01HRM205 Performance Management (HR core) SB01MKT203 Services Marketing (Marketing core) SB01FIN205 Business Analysis and Valuation SB01MKT204 International Business SB01OPS204 Logistics Management...

Words: 330 - Pages: 2

Premium Essay

Working Capital - Tandon Committee

...Maximum permissible bank finance - Tandon Committee. As per the recommendations of Tandon Committee, the Corporates should be discouraged from accumulating too much of stocks of current assets and should move towards very lean inventories and receivable levels. The committee even suggested the maximum levels of Raw Material, Stock-in-process and Finished Goods which a corporate operating in an industry should be allowed to accumulate These levels were termed as inventory and receivable norms. Depending on the size of credit required, the funding of these current assets (working capital needs) of the Corporate could be met by one of the following methods: • First Method of Lending: Banks can work out the working capital gap, i.e. total current assets less current liabilities other than bank borrowings (called Maximum Permissible Bank Finance or MPBF) and finance a maximum of 75 per cent of the gap; the balance to come out of long-term funds, i.e., owned funds and term borrowings. This approach was considered suitable only for very small borrowers i.e. where the requirements of credit were less than Rs.10 lacs • Second Method of Lending: Under this method, it was thought that the borrower should provide for a minimum of 25% of total current assets out of long-term funds i.e., owned funds plus term borrowings. A certain level of credit for purchases and other current liabilities will be available to fund the build-up of current assets and the bank will provide the balance...

Words: 617 - Pages: 3

Premium Essay

Ytrytr

...University of Management Sciences FINN 400 – Applied Corporate Finance Spring 2013 Instructor Dr. Fazal Jawad Seyyed, CFA Room No. 208 SDSB Office Hours TBA Email fazal.jawad@lums.edu.pk Telephone 042-3560-8030 Secretary/TA Saleem A. Khan TA Office Hours TBA Course URL (if any) LMS Course Basics Credit Hours 4 Lecture(s) Nbr of Lec(s) Per Week 2 Duration 1:50 Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration Tutorial (per week) Nbr of Lec(s) Per Week Duration Course Distribution Core ACF - Core Elective Open for Student Category Close for Student Category COURSE DESCRIPTION Applied Corporate Finance is a case-based course in intermediate level finance. It provides insights into the role of the financial manager, whose primary responsibility consists of acquiring funds needed by the firm and directing these funds into projects that will maximize the value of the firm for its owners. In reaching this objective, financial managers perform such varied roles/tasks as financial forecasting and analysis, raising capital from most economical sources, channelizing firm’s resources to projects with best pay offs, dealing in foreign currency and global financial markets to name a few. As an applied course, the focus is on: (a) application of financial concepts, models, and tools to address typical problems faced by financial managers, (b) examining financial theories and concepts in light of corporate practices and empirical evidence for better understanding...

Words: 325 - Pages: 2

Premium Essay

Hi World

...The WACC Fallacy: The Real Effects of Using a Unique Discount Rate 1 Philipp Kr¨ ger u Geneva Finance Research Institute - Universit´ de Gen`ve e e Augustin Landier Toulouse School of Economics David Thesmar HEC Paris and CEPR First Version: February 2011 This Version: September 2011 We greatly appreciate comments and suggestions by Malcolm Baker, Andor Gy¨rgy, Owen Lamont, o Masahiro Watanabe, Jeff Wurgler and seminar participants at the NBER Behavioral Finance Spring Meeting, the University of Mannheim, the 2011 European Financial Management Association meetings, the 2011 European Finance Association meetings, the CEPR European Summer Symposium on Financial Markets and HEC Lausanne. Boris Vall´e provided excellent research assistance. Thesmar e thanks the HEC Foundation for financial support. Corresponding Author: Philipp Kr¨ger. Email: u philipp.krueger@unige.ch, Telephone: +41 (0)22 379 85 69. Augustin Landier, augustin.landier@tsefr.eu, Telephone: +33 (0)5 61 12 86 88. David Thesmar, thesmar@hec.fr, Telephone: +33 (0)1 39 67 94 12. 1 Electronic copy available at: http://ssrn.com/abstract=1764024 The WACC Fallacy: The Real Effects of Using a Unique Discount Rate Abstract We document investment distortions induced by the use of a single discount rate within firms. According to textbook capital budgeting, firms should value any project using a discount rate determined by the risk characteristics of the project. If they use a unique company-wide discount...

Words: 18677 - Pages: 75

Premium Essay

Solution

...enable the Bank focus on its core functions and achieve its Vision and Mission of being a world –class Central Bank. The changes, which have brought about an appropriate organizational structure, were founded on two critical success factors, which will focus on core functions and the provision of effective and efficient support system. It is also meant to maximize co-ordination at the Deputy Governors management level to ensure that workflow is not hindered considering the leverage of some processes when the Bank is fully automated. A major plank of the restructuring and reengineering exercise will be the automation of most of the Bank’s processes using the latest state of the art technology to enhance the Bank’s performance in the ardous task of managing the nation’s economy The new structure ensures that more than two Deputy Governors are involved in the conduct of the core functions of the Bank, as well as the compatibility of functions and the strategic direction for the Bank. The various functions were grouped as follows: n Deliver services to customers (Operations) n Supervise the financial system and monitor implementation of policy (Financial Services and Surveillance) n Provide support in administering the organization (Corporate Services) n To provide framework for the organization and assure its future. (Policy) The new structure is made up of the following: - Office of the Governor, Chief Joseph Sanusi; Deputy Governor, Corporate Services, Mr. Oluwole Oduyemi;...

Words: 499 - Pages: 2

Premium Essay

Professional

...DOING BUSINESS IN ASIA, EUROPE, AMERICA I. Core Book: a. Week 2: - Core text Ch.7 (pp.192-221) b. Week 4a: - Core text Ch. 3 (pp. 60-84) c. Week 5a: - Core Text Ch. 13 pages 402-405 d. Week 7ab: - Core text Ch.14 (pp.433-438) - Core text (2008) pp. 13-15 and 60-61 e. Week 9ab: - Core text Ch. 14 & 15 - Core text Ch 16 pp.482-504 f. Week 11: - Core Text, Chapter 19, Pages 592-606 II. Other Book: a. Week 3a3b: - Read Moffet, M., Stonehill, A. & Eiteman, D. (2006) Fundamentals of Multinational Finance, Chapter 11, 12 & 13. - Deutsche Banks Global Registered Shares (pp.332-333). - Tirstup Biomechanics (Denmark): Raising Dollar Debt (pp.357-359) b. Week 5b - Sanyal (2001). International Management: A Strategic Perspective (Prentice Hall), Ch.2, pp.66-77 c. Week 6ab: - Read Moffet, M., Stonehill, A. & Eiteman, D. (2006) Fundamentals of Multinational Finance, Chapter 20 & Read Stanley Works & Corporate Inversion (pages 541-545) d. Week 7a 7b: - Moffat, Stonehill & Eiteman (2006). Fundamentals of Multinational Finance, Ch.19 - Gardner & Weirich (1992). Business Investigations: How CFOs can manage risk through information, Journal of Corporate Accounting & Finance, Vol.10, Issue 1, (pp.129-139). - Madura & Fox (2007). International Financial Management, Ch. 19, pp.652, 659-661 e. Week 8a : - Chetty, S. & Campbell-Hunt, C. (2004) ‘A Strategic Approach to Internationalization: A Traditional Versus a “Born-Global” Approach’, Journal...

Words: 1922 - Pages: 8