MEASURES OF CREDIT SPREAD: YIELD SPREAD: Yield Spread is the difference between the yield-to-maturity of a risky bond and the yield-to-maturity of an on-the-run treasury benchmark bond with similar but not necessarily identical maturity. YTM is the constant discount rate which, when applied to the bond’s cash flows, re-prices the bond. Assumptions: * An investor who buys a bond can achieve a return equal to the YTM if the bond is held to maturity and if all coupons can be reinvested
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Travis Vigneault & Nicola Tschopp The Business Size-Up Lufthansa has been impacted by a booming U.S. economy where the value of the USD has been increasing steadily since 1980. By January 1985 the USD was at record levels against other currencies. Many signs such as the current interest rate differential between the US and Germany indicate that the value of the USD might continue to rise. However, there is great speculation as to where the USD will be valued in a year as many feel that it is
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Answers to Practice Questions 1. Downward sloping. This is because high coupon bonds provide a greater proportion of their cash flows in the early years. In essence, a high coupon bond is a ‘shorter’ bond than a low coupon bond of the same maturity. 2. The key here is to find a combination of these two bonds (i.e., a portfolio of bonds) that has a cash flow only at t = 6. Then, knowing the price of the portfolio and the cash flow at t = 6, we can calculate the 6-year spot rate. We begin
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Life-Cycle Investing in Theory and Practice Zvi Bodie Life-cycle investing, especially investing for retirement, is today a matter of intense concern to millions, perhaps billions, of people around the world. In the past three decades, many respected finance theorists and behavioral scientists have studied how people should and actually do make investment decisions. Theorists have produced optimization models that capture important features of reality, such as changing investment opportunities, unpredictable
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| | |Methods of Valuation for Mergers and Acquisitions: Arcadian Microarray Technologies, Inc. | |Written Case Analysis | Methods of Valuation for Mergers and Acquisitions: Arcadian Microarray Technologies, Inc. Case Summary The case is about a private
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Welcome to Financial Models in Excel Situation report 1 / 17 • Peter Raahauge Department of Finance Office: A 5.21, Solbjerg plads Background: ˚ – PhD in economics (Arhus) 1999 – System developer (Simcorp) 1999-2000 – Assisting/Associate Professor/Lecturer (CBS) 2000-2012 2 / 17 • Goal The overall goal • Practical implementation of financial theory How to get there? • Exercise-based (solving “real world” problems) • IT-based, everything based on Excel (and VBA) • Professional
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Surname: ______________________ Given names: ___________________ Student ID number: ______________ Signature: ______________________ THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF BANKING AND FINANCE FINS2624 PORTFOLIO MANAGEMENT FINAL EXAMINATION – SESSION 2, 2012 1. Time allowed – 3 hours 2. Reading time – 10 minutes 3. Answer all questions. 4. For Part A, mark the answers on the generalized answer sheet provided. For Part B, write the answers in the answer booklet. 5. This paper must not
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Value of Equity and Per Share Value when there are options and warrants outstanding Aswath Damodaran 1 Equity Value and Per Share Value: A Test l Assume that you have done an equity valuation of Microsoft. The total value for equity is estimated to be $ 170 billion and there are 1204 million shares outstanding. What is the value per share? 2 An added fact l On September 30, 1997, Microsoft had 258 million options outstanding, granted to employees over time. These options had
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expanded at an annualized rate of 4.3 percent in the first quarter, and forecasts for 2011–12 are broadly unchanged, with offsetting changes across various economies. However, greater-than-anticipated weakness in U.S. activity and renewed financial volatility from concerns about the depth of fiscal challenges in the euro area periphery pose greater downside risks. Risks also draw from persistent fiscal and financial sector imbalances in many advanced economies, while signs of overheating are becoming
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MULTINATIONAL CAPITAL STRUCTURE and COST OF CAPITAL ➢ Capital structure – refers to the proportion of LT debt and equity and the particular forms of capital chosen to finance the assets of the firm ➢ Mgment must choose: ■ the proportions of D and E ■ the currency of denomination ■ fixed or floating rate interest payments ■ indenture provisions ■ conversion features ■ seniority ■ maturity o Perfect mkt assumptions: -frictionless mkts -equal access
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